Full text of "Revenue act of 1921 : complete text of H.R. 8245 as finally adopted by the United States Senate and House of Representatives and approved by the President November 23, 1921, at 3.55 P.M. (Issued December, 1921)"

See other formats

»l-i 



?'■€ 



I 



1^ 



•*■# 






*«'- 







(Ifarttell Untosrisitg ffitbrarg 



Ex^uv^a\>\eXxvvst;Co^ 



The date shows when this volume was take 

To renew thie book copy the call No. and give 
to the librarian. 



HOME USE RULES 

All Books subject to recall 

All borrowers must regis- 
ter in the library to bor- 
row books for home use. 

All books must be re- 
turned at end of college 
year for inspection and 
repfurs. 
Limited books must be 
returned within the four 
week limit and not renewed. 

Students must return all 
books before leaving town. 
Officers should arrange for 
the return of books wanted 
during their absence from 
town. 

Volumes of periodicals 
and of pamphlets are held 
in the Ubrary as much as 
possible. For special pur- 
poses they are given out 
for a limited time. 

Borrowers should not use 
their Ubrary privileges for 
the benefit of other persons. 

Books of special value 
and gift books, when the 
giver wishes it, are not al- 
lowed to circulate. 

Readers are asked to re- 
port all cases of books 
marked or mutilated. 



Do not deface books by marks and writing. 



>■ ■««-.« Cornell University Library 
HJ2379.A7 E64 1921 



Revenue act of 1921 





,. 3 1924 030 264 679 
olin 




Cornell University 
Library 



The original of tiiis bool< is in 
tine Cornell University Library. 

There are no known copyright restrictions in 
the United States on the use of the text. 



http://www.archive.org/details/cu31924030264679 



Revenue Act ofi92i 



Complete text of H. R. 8245 as fin- 
ally adopted by the United States 
Senate and House of Representatives 
and approved by the President 
November 23, 1921, at 3.55 P. M. 

(Issued December, ip2i) 



THE EQUITABLE 
TRUST COMPANY 

OF NEW YORK 

New York^ Offices Foreign Offices 

,„ _ 7 King William Street, E. C. 4 

37 Wall Street London 

355 Madison Avenue (at 45th St.) ^3 Rue de la Paix 

222 Broadway (at Park Row) Paris 



t\Soqo4o 



Press of 

the kalkhoff company 

New York Citv 



FOREWORD 

The Revenue Act of 1 92 1 , as finally agreed 
upon in H. R. 8245 as amended, was 
reported out of the joint Conference 
Committee of the United States Senate 
and House of Representatives on No- 
vember 19, 1921; on November 21st it 
was adopted by the House and on No- 
vember 23rd it was adopted by the Senate 
and was approved by the President on 
November 23, 1921, at 3.55 P. M. 

In the following pages we have supple- 
mented the text of the law by marginal 
references and an index which will make 
the law available for ready reference. 

The Act is to take effect upon passage 
except as otherwise provided (Sec. 1404), 
and the parts of the Revenue Act of 1918 
which are repealed are listed in Section 
1400. The Income Tax-Title II is made 
effective as of January 1, 1921, by Sec- 
tion 263, but there are certain sections 
of the Income Tax law as well as of 
other titles in which a different effective 
date is specially provided. 

The Equitable Trust Company 
OF New York 

December, 1921 



CONTENTS 



Title I. 


Title II. 


Title III. 


Title IV. 


Title V. 


Title VI. 


Title VII. 


Title Vm. 


Title IX. 


Title X. 


Title XI. 


Title XII. 


Title Xm. 


Title XIV. 



Section 1. 
Section 2. 



Section 200, 
Section 201. 
Section 202. 
Section 203. 
Section 204. 
Section 20S, 
Section 206. 



Section 210. 
Section 211 

Section 212, 
Section 213, 

Section 214, 



TITLES OF THE ACT 

PACE 

General Definitions 1 

Income Tax 3 

War-Profits and Excess-Profits Tax for 1921 104 

Estate Tax 116 

Tax on Telegraph and Telephone Messages 132 

Tax on Beverages and Constituent Parts thereof 134 

Tax on Cigars, Tobacco and Manufactures thereof 138 

Tax on Admissions and Dues 146 

Excise Taxes (on Sales and Certain Leases) ISO 

Special Taxes (Capital Stock, Occupations and Special 

Taxes) 1S7 

Stamp Taxes 173 

Tax on Employment of Child Labor 18S 

General Administrative Provisions 189 

General Provisions 216 

SECTIONS OF THE ACT. 
TITLE I.— GENERAL DEFINITIONS. 

Title of this Act 1 

Definitions of Words as Used in this Act 1 

TITLE II.— INCOME TAX. 
Part I. — General Provisions. 

Definitions of words used in this Title 3 

Dividends 4 

Basis for Determining Gain or Loss 6 

Inventories 1 1 

Net Losses 11 

Fiscal Years 1920-1921 and 1921-1922 13 

Capital Gain 14 

Part II. — Individuai-s. 

Normal Tax 16 

Surtax (a) for Year 1921 17 

For Year 1922 and Thereafter 22 

(b) Sale of Mines, Oil or Gas Wells 26 

Net Income of Individuals Defined 26 

(a) Gross Income Defined 27 

(b) Exempt Income 28 

(c) Nonresident Aliens 31 

Deductions Allowed Individuals 31 

v 



Section 2 IS. 
Section 216. 
Section 217. 
Section 218. 
Section 219. 
Section 220. 
Section 221. 
Section 222. 
Section 223. 
Section 224. 
Section 22S. 
Section 226. 
Section 227. 

Section 228. 
Section 229. 



Section 230. 
Section 231. 
Section 232. 
Section 233. 

Section 234. 

Section 23S. 
Section 236. 
Section 237. 
Section 238. 
Section 239. 
Section 240. 
Section 241. 
Sections 242 
Sections 246 



Section 250. 
Section 2S1. 
Section 2S2. 
Section 253. 
Section 254. 
Section 255. 
Section 256. 
Section 257. 
Section 258. 



CONTENTS 

PAGE 

Items not Deductible 38 

Credits Allowed Individuals 39 

Net Income of Nonresident Alien Individuals 40 

Partnerships and Personal Service Corporations 45 

Estates and Trusts 47 

Evasion of Surtaxes by Incorporation SO 

Payment of Individual's Tax at Source 51 

Credit for Taxes in Case of Individuals 54 

Individual Returns 56 

Partnership Returns 57 

Fiduciary Returns 57 

Returns for a Period of Less than Twelve Months 58 

Time and Place for Filing Individual, Partnership and 

Fiduciary Returns 59 

Understatement in Returns 60 

Incorporation of Individual or Partnership Business 60 

Part III. — Corporations 

Tax on Corporations 61 

Conditional and Other Exemptions of Corporations 61 

Net Income of Corporations Defined 64 

(a) Gross Income of Corporations Defined 64 

(b) Foreign Corporations 65 

(a) Deductions Allowed Corporations 65 

(b) Foreign Corporations 71 

Items not Deductible by Corporations 72 

Credits Allowed Corporations 72 

Payment of Corporation Income Tax at Source 73 

Credit for Taxes in Case of Corporations 74 

Corporation Returns 77 

Consolidated Returns of Corporations 78 

Time and Place for Filing Corporate Returns 79 

to '245. Taxes on (Life) Insurance Companies 80 

and 247. Taxes on Insurance Companies other than 

Life and Mutual Companies 84 

Part IV. — ^Administrative Provisions. 

Payment of Taxes 88 

Receipts for Taxes 96 

Refunds 97 

Penalties 98 

Returns of Payments of Dividends 98 

Returns of Brokers 99 

Information at Source 99 

Returns to be Public Records 100 

Publication of Statistics 101 



CONTENTS 

PACE 

Section 259. Collection of Foreign Items 102 

Section 260. Citizens of Possessions of the United States 102 

Section 261. Porto Rico and the Philippine Islands 103 

Section 262. Income from Sources within the Possessions of the 

United States 103 

Section 263. Effective Date of Title 104 



TITLE in.— WAR-PROFITS AND EXCESS-PROFITS TAX 

FOR 1921. 

Part I. — General Definitions. 

Section 300. Definitions of words used in this Title 104 

Part II. — Imposition of Tax. 

Section 301. Tax Rate for 1921 lOS 

Section 302. Limitation on Tax 106 

Section 303. Personal Service Corporation Income in part 107 

Section 304. (a) Exempt Corporations 107 

(b) Less than $3,000 net income, exempt 108 

(c) Gold Mining Corporations 108 

Section 30S. Tax for less than 12 Months 108 

Part III. — Excess-Profits Credit. 
Section 312. Excess-Profits Credit 108 

Part IV. — Net Income. 
Section 320. Ascertainment of Net Income 108 

Part V. — Invested Capital. 

Section 32S. Definitions of words used in this Title 109 

Section 326. "Invested Capital" Defined 110 

Section 327. Special Cases Subject to Determination by Commis- 
sioner 112 

Section 328. Basis for determination under Section 327 113 

Part VI. — Reorganizations. 
Section 331. Reorganizations after March 3, 1917 114 

Part VII. — Miscellaneous. 

Section 335. Fiscal Year Returns for 1920-1921 and 1921-1922 115 

Section 336. Returns and Payment of Taxes 116 

Section 337. Sale of Mines, Oil and Gas Wells 116 

Section 338. Effective Date of Title 116 

vii 



CONTENTS 
TITLE IV.— ESTATE TAX. 

PAGE 

Section 400. Definitions of words used in this Title 116 

Section 401. Tax Rates 117 

Section 402. Gross Estate 119 

Section 403. Net Estate 121 

Section 404. Two Months' Notice and Return by the Executor 126 

Section 40S. When the Collector is to make Return 127 

Section 406. Tax Due and Payable. Extension of Time. Payment 

of the Tax 127 

Section 407. Payment of Additional Tax Found to be Due 127 

Section 408. Collection of Tax if not Paid When Due 129 

Section 409. Tax a Lien for Ten Years. Transfers in Contemplation 

of Death 130 

Section 410. Penalties 131 

Section 411. Probate or Administration Proceedings in United States 

Court for China 131 



TITLE v.— TAX ON TELEGRAPH AND TELEPHONE MESSAGES. 

Section SOO. Tax on Telegraph, Telephone, Cable, and Radio Mes- 
sages 132 

Section SOI. Tax Paid by Person Paying for Service Rendered 134 

Section S02. Returns, Collection and Payment of Tax 134 



TITLE VI.— TAX ON BEVERAGES AND CONSTITUENT PARTS 
THEREOF. 

Section 600. Tax on Distilled Spirits 134 

Section 601. Certain distillation not deemed rectification 13S 

Section 602. Tax on Soft Drinks 13S 

Section 603. Returns and Payment of Tax on Soft Drinks 137 



TITLE VII.— TAX ON CIGARS, TOBACCO, AND MANUFACTURES 

THEREOF. 

Section 700. Cigars and Cigarettes 138 

Section 701. Tobacco and Snuff 140 

Section 703. Cigarette Papers 142 

Section 704. Dealers in Leaf Tobacco 143 

TITLE VIII.— TAX ON ADMISSIONS AND DUES. 

Section 800. Admissions 146 

Section 801. Dues 149 

Section 802. Returns and Payment of the Tax ISO 

viii 



CONTENTS 

TITLE IX.— EXCISE TAXES. 

„ . , PAGE 

bection 900. Articles Sold or Leased by Manufacturer, Producer 

or Importer (Tax Based on Price for which Sold).. ISO 

Section 901. Selling or Leasing at Less than Fair Market Value 1S2 

Section 902. Sculpture, Paintings, etc.. Sold and Exceptions iSi 

Section 903. Returns and Payment of the Tax 1S3 

Section 904. Articles Sold or Leased by Manufacturer, Producer, 
or Importer (Tax Based on Excess of Prices for 

which sold above certain values) 1S4 

Section 90S. Jewelry, Watches, Clocks, Opera Glasses, etc., Sold 154 

Section 906. Contracts to Sell Made Prior to August IS, 1921 ISS 

TITLE X.— SPECIAL TAXES. 

Section 1000. Capital Stock Tax 157 

Section 1001. Miscellaneous Occupational Taxes 158 

Section 1002. Special Tobacco Manufacturer's Tax 163 

Section 1003. Special Tax on Use of Boats 164 

Section 1004. Penalty for Nonpayment of Special Taxes 165 

Sections 1005 to 1007. Tax on Narcotics 166 

TITLE XL— STAMP TAXES. 

Section 1100. Imposition of Tax 173 

Sections 1101 to 1107. Administrative Provisions 173 

Schedule A. Stamp Taxes — ^List of Transactions Subject to Tax 178 

TITLE XII.— TAX ON EMPLOYMENT OF CHILD LABOR. 

Section 1200. Employers Taxed 18S 

Section 1201. Net Profits Determined 185 

Section 1202. Articles Sold at Less than a Fair Market Price 186 

Section 1203. Employment Certificates 187 

Section 1204. Returns Due 18S 

Section 120S. Payment of the Tax 188 

Section 1206. Inspection of Labor Conditions 188 

Section 1207. "Taxable Year" Defined 189 

TITLE XIII.— GENERAL ADMINISTRATIVE PROVISIONS. 

Section 1300. Laws made Applicable 189 

Section 1301. Method of Collecting Tax 189 

Section 1302. Penalties 190 

Section 1303. Rules and Regulations 191 

Section 1304. Overpayments and OvercoUections 191 

Section 1305. Articles Exported 192 

Section 1306. Fractional Parts of Cent 192 

Section 1307. Returns 192 

Section 1308. Examination of Books and Witnesses 193 

ix 



Section 1309. 
Section 1310. 
Section 1311. 
Section 1312. 
Section 1313. 
Section 1314. 
Sections 13 IS 
Sections 1318 
Section 1321. 
Section 1322. 
Section 1323. 
Section 1324. 
Section 132S. 

Section 1326. 
Section 1327. 
Section 1328. 
Section 1329. 

Section 1330. 
Section 1331. 
Section 1332. 



Section 1400. 
Section 1401. 
Section 1402. 
Section 1403. 
Section 1404. 



CONTENTS 

rACE 

Unnecessary Examinations 193 

Jurisdiction of Courts 193 

Amendments to Revised Statutes (Administrative) .... 194 

Final Determination and Assessments 200 

Administrative Review 200 

Retroactive Regulations 201 

to 1317. Refunds (Amendments of Revised Statutes) 201 

to 1320. Limitations upon Suits 203 

Limitations upon Prosecutions 204 

Assessments 20S 

Fraudulent Returns 20S 

Interest on Refunds and Judgments 205 

Payment of Taxes by Check or United States Se- 
curities 206 

Frauds on Purchasers 207 

Tax Simplification Board 207 

Consolidation of Liberty Bond Tax Exemptions 209 

Deposit of United States Bonds or Notes in Lieu of 

Surety 210 

Lost Stamps for Tobacco, Cigars and so forth 212 

Consolidated Returns for Year 1917 212 

Alternative Tax on Personal Service Corporations.... 213 

TITLE XIV.— GENERAL PROVISIONS. 

Repeals (of parts of Revenue Act of 1918) 216 

Increase in Note Authorization 217 

Increase in Treasury Savings Certificate Limit 218 

Saving Clause in Event of Unconstitutionality 218 

Effective Date of Act 218 



REVENUE ACT OF 192 1 

Approved by the President, November 23, 1921 

[Public— No. 98— 67th Congress] 

[H. R. 8245] 

AN ACT 

To reduce and equalize taxation, to provide rev- 
enue, and for other purposes. 

Be it enacted by the Senate and House of Rep- 
resentatives of the United States of America in 
Congress assembled, 

Title I. — General Definitions. STfinltlL. 

Section i. That this act may be cited as the 
"Revenue Act of 1921." 

Sec. 2. That when used in this Act — 

(i) The term "person" includes partnerships "Per.on" 
and corporations, as well as individuals ; 

(2) The term "corporation" includes associa- "Corporation" 
tions, joint-stock companies, and insurance com- 
panies; 

(3) The term "domestic" when applied to a "Dome.tic" 
corporation or partnership means created or or- 
ganized in the United States; 

(4) The term "foreign" when applied to a cor- "Foreign" 
poration or partnership means created or organ- 
ized outside the United States ; 



Sec. 2 



"United States" 



"Secretary" 



"Commisaioner" 



'Collector" 



"Taxpayer" 



"Military or Naval 
Forces of the 
United States" 



* * Go ver n men t 
contract" 



REVENUE ACT OF 1921 

(5) The term "United States" when used in a 
geographical sense includes only the States, the 
Territories of Alaska and Hawaii, and the District 
of Columbia; 

(6) The term "Secretary" means the Secretary 
of the Treasury; 

(7) The term "Commissioner" means the Com- 
missioner of Internal Revenue ; 

(8) The term "collector" means collector of 
internal revenue; 

(9) The term "taxpayer" includes any person, 
trust or estate subject to a tax imposed by this Act; 

(10) The term "military or naval forces of the 
United States" includes the Marine Corps, the 
Coast Guard, the Army Nurse Corps, Female, 
and the Navy Nurse Corps, Female, but this shall 
not be deemed to exclude other units otherwise in- 
cluded within such terms ; and 

(11) The term "Government contract" means 
(a) a contract made with the United States, or 
with any department, bureau, officer, commission, 
board, or agency, under the United States and act- 
ing in its behalf, or with any agency controlled by 
any of the above if the contract is for the benefit 
of the United States, or (b) a subcontract made 
with a contractor performing such a contract if the 
products or services to be furnished under the 
subcontract are for the benefit of the United States. 
The term "Government contract or contracts made 
between April 6, 1917, and November 11, 1918, 
both dates inclusive" when applied to a contract 
of the kind referred to in clause (a) of this sub- 
division, includes all such contracts which, al- 



Sec. 200 



INCOME TAX— GENERAL PROVISIONS 

though entered into during such period, were 
originally not enforceable, but which have been 
or may become enforceable by reason of subse- 
quent validation in pursuance of law. 

Title II.— Income Tax. 
Part I. — General Provisions. 

Definitions. Definition« 

Sec. 200. That when used in this title — 

( 1 ) The term "taxable year" means the calen- "TaxaWe Year- 
dar year, or the fiscal year ending during such 
calendar* year, upon the basis of which the net in- 
come is computed under section 212 or section 232. 

The term "fiscal year" means an accounting period 
of twelve months ending on the last day of any 
month other than December. The first taxable 
year, to be called the taxable year 1921, shall be 
the calendar year 1921 or any fiscal year ending 
during the calendar year 1921 ; 

(2) The term "fiduciary" means a guardian, "fiduciary- 
trustee, executor, administrator, receiver, conserv- 
ator, or any person acting in any fiduciary capacity 

for any person, trust or estate; 

(3) The term "withholding agent" means any ^wi^^hoMmg 
person required to deduct and withhold any tax 

under the provisions of section 221 or section 237; 

(4) The term "paid," for the purposes of the "Paid" 
deductions and credits under this title, means "paid !,'f/^ued" 
or accrued" or "paid or incurred," and the terms 
"paid or incurred" and "paid or accrued" shall be 
construed according to the method of accounting 
upon the basis of which the net income is com- 
puted under section 212; and 



Sec. 201 



"Personal service 
corporation" 



REVENUE ACT OF 1921 

(5) The term "personal service corporation" 
means a corporation whose income is to be as- 
cribed primarily to the activities of the principal 
owners or stockholders who are themselves reg- 
ularly engaged in the active conduct of the affairs 
of the corporation and in which capital (whether 
invested or borrowed) is not a material income- 
producing factor ; but does not include any foreign 
corporation, nor any corporation 50 per centum or 
more of whose gross income consists either ( i ) of 
gains, profits, or income derived from trading as a 
principal, or (2) of gains, profits, commissions, or 
other income, derived from a governrnent con- 
tract or contracts made between April 6, 1917, and 
November 11, 1918, both dates inclusive. 



Dividends. 

d?£ta«f"''" Sec. 201. (a) That the term "dividend" when 

used in this title (except in paragraph (10) of sub- 
division (a) of section 234 and paragraph (4) of 
subdivision (a) of section 245) means any distribu- 
tion made by a corporation to its shareholders or 
members, whether in cash or in other property, 
out of its earnings or profits accumulated since 
February 28, 191 3, except a distribution made by a 
personal service corporation out of earnings or 
profits accumulated since December 31, 191 7, and 
prior to January i, 1922. 

f^SSS'a'o^^ofi" (b) For the purposes of this Act every 'dis- 
tribution is made out of earnings or profits, and 
from the most recently accumulated earnings or 
profits, to the extent of such earnings or profits 
accumulated since February 28, 191 3; but any 
earnings or profits accumulated or increase in 
value of property accrued prior to March i, 1913, 



Sec. 201 
INCOME TAX— GENERAL PROVISIONS 

may be distributed exempt from the tax, after the 
earnings and profits accumulated since February 
28, 1913, have been distributed. If any such tax- 
free distribution has been made the distributee 
shall not be allowed as a deduction from gross in- 
come any loss sustained from the sale or other dis- 
position of his stock or shares unless, and then only 
to the extent that, the basis provided in section 202 
exceeds the sum of ( i ) the amount realized from 
the sale or other disposition of such stock or shares, 
and (2) the aggregate amount of such distribu- 
tions received by him thereon. 

(c) Any distribution (whether in cash or other Distribution of 

\ ■* * . .f 111 accumulations or 

property) made by a corporation to its sharehold- ?S"?J^j°h",''w'i3 

ers or members otherwise than out of ( i ) earnings 

or profits accumulated since February 28, 1913, 

or (2) earnings or profits accumulated or increase 

in value of property accrued prior to March i, 

191 3, shall be applied against and reduce the 

basis provided in section 202 for the purpose of 

ascertaining the gain derived or the loss sustained 

from the sale or other disposition of the stock or 

shares by the distributee. 

(d) A stock dividend shall not be subject to stock dividend 
tax but if after the distribution of any such divi- 
dend the corporation proceeds to cancel or redeem 

its stock at such time and in such manner as to make 
the distribution and cancellation or redemption 
essentially equivalent to the distribution of a tax- 
able dividend, the amount received in redemption 
or cancellation of the stock shall be treated as a 
taxable dividend to the extent of the earnings or 
profits accumulated by such corporation after Feb- 
ruary 28, 1913. 



Sec. 202 



Time distribution 
becomes taxable 



Distribution made 
during first 
60 days 
of year 



REVENUE ACT OF 1921 

(e) For the purposes of this Act, a taxable dis- 
tribution made by a corporation to its sharehold- 
ers or members shall be included in the gross in- 
come of the distributees as of the date when the 
cash or other property is unqualifiedly made sub- 
ject to their demands. 

(f ) Any distribution made during the first sixty 
days of any taxable year shall be deemed to have 
been made from earnings or profits accumulated 
during preceding taxable years ; but any distribu- 
tion made during the remainder of the taxable 
year shall be deemed to have been made from earn- 
ings or profits accumulated between the close of 
the preceding taxable year and the date of dis- 
tribution, to the extent of such earnings or profits, 
and if the books of the corporation do not show 
the amount of such earnings or profits, the earn- 
ings or profits for the accounting period within 
which the distribution was made shall be deemed 
to have been accumulated ratably during such 
period. This subdivision shall not be in effect 
after December 31, 1921. 



Gain or loss 
determined 

Property acquired 
after February 
28, 1913 



Inventory value 



Property acquired 
by gift after 
Dec. 31, 1920 



Basts for Determining Gain or Loss. 

Sec. 202. (a) That the basis for ascertaining 
the gain derived or loss sustained from a sale or 
other disposition of property, real, personal, or 
mixed, acquired after February 28, 191 3, shall be 
the cost of such property; except that — 

( 1 ) In the case of such property, which should 
be included in the inventory, the basis shall be the 
last inventory value thereof ; 

(2) In the case of such property, acquired by 
gift after December 31, 1920, the basis shall be the 

6 



Sec. 202 

INCOME TAX— GENERAL PROVISIONS 

same as that which it would have in the hands of 
the donor or the last preceding owner by whom it 
was not acquired by gift. If the facts necessary to 
determine such basis are unknown to the donee, 
the Commissioner shall, if possible, obtain such 
facts from such donor or last preceding owner, or 
any other person cognizant thereof. If the Com- 
missioner finds it impossible to obtain such facts, 
the basis shall be the value of such property as 
found by the Commissioner as of the date or 
approximate date at which, according to the best 
information the Commissioner is able to obtain, 
such property was acquired by such donor or last 
preceding owner. In the case of such property 
acquired by gift on or before December 31, 1920, 
the basis for ascertaining gain or loss from a sale 
or other disposition thereof shall be the fair market 
price or value of such property at the time of such 
acquisition ; 

(3) In the case of such property, acquired by l;rS!^J^Xvui. 
bequest, devise, or inheritance, the basis shall be "«■ '"^eritance 
the fair market price or value of such property 
at the time of such acquisition. The provisions of 
this paragraph shall apply to the acquisition of 
such property interests as are specified in subdivi- 
sion (c) or (e) of section 402. 

(b) The basis for ascertaining the gain derived ^ra^^JZ%uir„d 
or loss sustained from the sale or other disposition 1%%^""*" 
of property, real, personal, or mixed, acquired 
before March i, 191 3, shall be the same as that 
provided by subdivision (a) ; but — 

(i) If its sfair market price or value as of I'AsTi^e"!,';.*' 
March i, 1913, is in excess of such basis, the gain °'"°' 
to be included in the gross income shall be the ex- 



Sec. 202 



Value March I, 
1913, less than 
cost 



Selling price 
between cost and 
value March 1, 1913 



Property exchanged 
for property 
(See (d) below) 



Investment or 
business property 
exchanged 



Reorganizations 



REVENUE ACT OF 1921 

cess of the amount realized therefor over such 
fair market price or value; 

(2) If its fair market price or value as of 
March i, 191 3, is lower than such basis, the de- 
ductible loss is the excess of the fair market price 
or value as of March i, 191 3, over the amount 
realized therefor; and 

(3) If the amount realized therefor is more 
than such basis but not more than its fair market 
price or value as of March i, 1913, or less than 
s'Uch basis but not less than such fair market 
price or value, no gain shall be included in and no 
loss deducted from the gross income. 

(c) For the purposes of this title, on an ex- 
change of property, real, personal or mixed, for 
any other such property, no gain or loss shall be 
recognized unless the property received in ex- 
change has a readily realizable market value ; but 
even if the property received in exchange has a 
readily realizable market value, no gain or loss 
shall be recognized — 

(i) When any such property held for invest- 
ment, or for productive use in trade or business 
(not including stock-in-trade or other property 
held primarily for sale) , is exchanged for property 
of a like kind or use; 

(2) When in the reorganization of one or more 
corporations a person receives in place of any 
stock or securities owned by him, stock or securi- 
ties in a corporation a party to or resulting from 
such reorganization. The word "reorganization," 
as used in this paragraph, includes a merger or 
consolidation (including the acquisition by one 
corporation of at least a majority of the voting 



Sec. 202 

INCOME TAX— GENERAL PROVISIONS 

Stock and at least a majority of the total number of 
shares of all other classes of stock of another cor- 
poration, or of substantially all the properties of 
another corporation), recapitalization, or mere 
change in identity, form, or place of organization 
of a corporation (however effected) ; or 

(3) When (A) a person transfers any property, fo°''eor^V"t'ion"'"' 
real, personal or mixed, to a corporation, and im- 
mediately after the transfer is in control of such 
corporation, or (B) two or more persons transfer 
any such property to a corporation, and immedi- 
ately after the transfer are in control of such corpo- 
ration, and the amounts of stock, securities, or both, 
received by such persons are in substantially the 
same proportion as their interests in the property 
before such transfer. For the purposes of this 
paragraph, a person is, or two or more persons are, 
"in control" of a corporation when owning at least d'fi„';T''°' ' 
80 per centum of the voting stock and at least 80 
per centum of the total number of shares of all 
other classes of stock of the corporation. 

(d) (i) Where property is exchanged for other J^r^l^rty^""''^ 
property and no gain or loss is recognized under 
the provisions of subdivision (c), the property re- 
ceived shall, for the purposes of this section, be 
treated as taking the place of the property ex- 
changed therefor, except as provided in subdivi- 
sion (e) ; 

(2) Where property is compulsorily or invol- ^^X'cS^puuI^n'' 
untarily converted into cash or its equivalent in the 
manner described in paragraph (12) of subdivi- 
sion (a) of section 214 and paragraph ( 14) of sub- 
division (a) of section 234, and the taxpayer pro- 
ceeds in good faith to expend or set aside the pro- 



Sec. 202 



Value of property 
when loss not 
allowed 



Mixed exchange 
of property 



REVENUE ACT OF 1921 
ceeds of such conversion in the form and in the 
manner therein provided, the property acquired 
shall, for the purpose of this section, be treated as 
taking the place of a like proportion of the prop- 
erty converted ; 

(3) Where no deduction is allowed for a loss or 
a part thereof under the provisions of paragraph 
(5) of subdivision (a) of section 214 and para- 
graph (4) of subdivision (a) of section 234, that 
part of the property acquired with relation to 
which such loss is disallowed shall for the pur- 
poses of this section be treated as taking the place 
of the property sold or disposed of. 

(e) Where property is exchanged for other 
property which has no readily realizable market 
value, together with money or other property 
which has a readily realizable market value, then 
the money or the fair market value of the property 
having such readily realizable market value re- 
ceived in exchange shall be applied against and 
reduce the basis, provided in this section, of the 
property exchanged, and if in excess of such basis, 
shall be taxable to the extent of the excess; but 
when property is exchanged for property speci- 
fied in paragraphs (i), (2), and (3) of subdivi- 
sion (c) as received in exchange, together with 
money or other property of a readily realizable 
market value other than that specified in such par- 
agraphs, the money or the fair market value of 
such other property received in exchange shall be 
applied against and reduce the basis, provided in 
this section, of the property exchanged, and if in 
excess of such basis, shall be taxable to the extent 
of the excess. 



10 



Sec. 203-204 
INCOME TAX— GENERAL PROVISIONS 

(f) Nothing in this section shall be construed J^f^^'i^'Sj. 
to prevent (in the case of property sold under con- 
tract providing for payment in installments) the 
taxation of that portion of any installment payment 
representing gain or profit in the year m which 
such payment is received. 

Inventories. 

Sec. 203. That whenever in the opinion of the invemoru. 
Commissioner the use of inventories is necessary in 
order clearly to determine the income of any tax- 
payer, inventories shall be taken by such taxpayer 
upon such basis as the Commissioner, with the 
approval of the Secretary, may prescribe as con- 
forming as nearly as may be to the best accounting 
practice in the trade or business and as most clear- 
ly reflecting the income. 

Net Losses. 

Sec. 204. (a) That as used in this section 
the terrn "net loss" means only net losses resulting 
from the operation of any trade or business regu- 
larly carried on by the taxpayer (including losses 
sustained from the sale or other disposition of real 
estate, machinery, and other capital assets, used in 
the conduct of such trade or business) ; and when 
so resulting means the excess of the deductions al- 
lowed by section 214 or 234, as the case may be, 
over the sum of the following: (i) the gross in- 
come of the taxpayer for the taxable year, (2) 
the amount by which the interest received free 
from taxation under this title exceeds so much of 
the interest paid or accrued within the taxable 
year on indebtedness as is not permitted to be de- 
ducted by paragraph (2) of subdivision (a) of 



"Net lo«8" 
defined 



II 



Sec. 204 

REVENUE ACT OF 1921 

section 214 or by paragraph (2) of subdivision 
(a) of section 234, (3) the amount by which the 
deductable losses not sustained in such trade or 
business exceed the taxable gains or profits not de- 
rived from such trade or business, (4) amounts 
received as dividends and allowed as a deduction 
under paragraph (6) of subdivision (a) of sec- 
tion 234, and (5) so much of the depletion deduc- 
tion allowed with respect to any mine, oil or gas 
well as is based upon discovery value in lieu of 
cost. 

Proof of (b) If for any taxable year beginning after 

December 31, 1920, it appears upon the produc- 
tion of evidence satisfactory to the Commissioner 
that any taxpayer has sustained a net loss, the 
amount thereof shall be deducted from the net 
income of the taxpayer for the succeeding taxable 
year ; and if such net loss is in excess of the net in- 
come for such succeeding taxable year, the amount 
of such excess shall be allowed as a deduction in 
computing the net income for the next succeeding 
taxable year; the deduction in all cases to be 
made under regulations prescribed by the Com- 
missioner with the approval of the Secretary. 

l°t^\o°J" (c) The benefit of this section shall be allowed 

''"°''"' to the members of a partnership and the beneficiar- 

ies of an estate or trust, and to insurance companies 
subject to the tax imposed by section 243 or 246, 
under regulations prescribed by the Commissioner 
with the approval of the Secretary. 



in 1921 



filrMi°ylir''ending (d) If it appcars, upon the production of evi- 

dence satisfactory to the Commissioner, that a tax- 
payer having a fiscal year beginning in 1920 and 
ending in 1921 has sustained a net loss during such 



12 



Sec. 205 

INCOME TAX— GENERAL PROVISIONS 

fiscal year, such taxpayer shall be entitled to the 
benefits of this section in respect to the same pro- 
portion of such net loss which the portion of such 
fiscal year falling within the calendar year 1921 is 
of the entire fiscal year. 

Fiscal Years 1 920-1 921 and 192 1 -1922. 
Sec. 205. (a) That if a taxpayer makes return F^^a^jear return, 
for a fiscal year beginning in 1920 and ending in 
1 92 1, his tax under this title for the taxable year 
1 92 1 shall be the sum of: (i) the same proportion 
of a tax for the entire period computed under 
Title II of the Revenue Act of 191 8 at the rates 
for the calendar year 1920 which the portion of 
such period falling within the calendar year 1920 
is of the entire period, and (2) the same propor- 
tion of a tax for the entire period computed under 
this title at the rates for the calendar year 1921, 
which the portion of such period falling within 
the calendar year 1921 is of the entire period. 

Any amount paid before or after the passage of ^l^^^l^'^l^^ 
this Act on account of the tax imposed for such ""J" "is Act 
fiscal year by Title II of the Revenue Act of 191 8 
shall be credited toward the payment of the tax 
imposed for such fiscal year by this Act, and if the 
amount so paid exceeds the amount of such tax 
imposed by this Act, the excess shall be credited or 
refunded in accordance with the provisions of 
section 252. 

(b) If a taxpayer makes return for a fiscal year R»caWear retum. 
beginning in 1921 and ending in 1922, his tax 
under this title for the taxable year 1922 shall be 
the sum of : ( i ) the same proportion of a tax for 
the entire period computed under this title (as in 

13 



Sec. 206 



Partnership fiscal 
year returns 1921 
and 1922 



•'Capital gain** 
defined 



REVENUE ACT OF 1921 

force on December 31, 1921) at the rates for the 
calendar year 1921 which the portion of such 
period falling within the calendar year 1921 is of 
the entire period, and (2) the same proportion of 
a tax for the entire period computed under this 
title (as in force on January i, 1922) at the rates 
for the Calendar year 1922 which the portion of 
such period falling within the calendar year 1922 
is of the entire period: Provided, That in the case 
of a personal service corporation the amount to be 
paid shall be only that specified in clause (2). 

(c) If a fiscal year of a partnership begins in 
1920 and ends in 1921, or begins in 1921 and ends 
in 1922, then (i) the rates for the calendar year 
during which such fiscal year begins shall apply 
to an amount of each partner's share of such part- 
nership net income (determined under the law 
applicable to such year) equal to the proportion 
which the part of such fiscal year falling within 
such calendar year bears to the full fiscal year, 
and (2) the rates for the calendar year during 
which such fiscal year ends shall apply to an 
amount of each partner's share of such partner- 
ship net income (determined under the law ap- 
plicable to such calendar year) equal to the pro- 
portion which the part of such fiscal year falling 
within such calendar year bears to the full fiscal 
year. 

Capital Gain. 

Sec. 206. (a) That for the purpose of this 
title : 

(i) The term "capital gain" means taxable 
gain from the sale or exchange of capital assets 
consummated after December 31, 1921; 



14 



Sec. 206 
INCOME TAX— GENERAL PROVISIONS 

(2) The term "capital loss" means deductible "Capuai lo.." 
loss resulting from the sale or exchange of capital 

assets consummated after December 31, 1921; 

(3) The term "capital deductions" means such "capuai 

J J . ,, , deductions" 

deductions as are allowed under this title for the 
purpose of computing net income and are properly 
allocable to or chargeable against items of capital 
gain as defined in this section ; 

(4) The term "capital net gain" means the ex- "capuainet 
cess of the total amount of capital gain over the 

sum of the capital deductions and capital losses ; 

(5) The term "ordinary net income" means the iU^om"" '' "" 
net income, computed in accordance with the pro- 
visions of this title, after excluding all items of 

capital gain, capital loss, and capital deductions; 
and 

(6) The term "capital assets" as used in this "cpitai «..et. " 
section means property acquired and held by the 
taxpayer for profit or investment for more than 

two years (whether or not connected with his 
trade or business), but does not include property 
held for the personal use or consumption of the 
taxpayer or his family, or stock in trade of the 
taxpayer or other property of a kind which would 
properly be included in the inventory of the tax- 
payer if on hand at the close of the taxable year. 

(b) In the case of any taxpayer (other than a Juctron',''' 
corporation) who for any taxable year derives a excepted""' 
capital net gain, there shall (at the election of the 
taxpayer) be levied, collected and paid, in lieu of 
the taxes imposed by sections 210 and 211 of this 
title, a tax determined as follows : 

A partial tax shall first be computed upon the Method of .uction 
basis of the ordinary net income at the rates and in 

15 



Sec. 210 



REVENUE ACT OF 1921 

the manner provided in sections 210 and 211, and 
the total tax shall be this amount plus I2j^ per 
centum of the capital net gain; but if the taxpayer 
elects to be taxed under this section the total tax 
shall in no such case be less than 12^ per centum 
of the total net income. The total tax thus de- 
termined shall be computed, collected and paid 
in the same manner, at the same time and subject 
to the same provisions of law, including penalties, 
as other taxes under this title. 



Capital gain for 
estates and trusts 



(c) In case of a partnership or of an estate or 
trust, the proper part of each share of the net in- 
come which consists, respectively, of ordinary net 
income and capital net gain, shall be determined 
under rules and regulations to be prescribed by the 
Commissioner with the approval of the Secretary, 
and shall be separately shown in the return of the 
partnership or estate or trust, and shall be taxed 
to the member or beneficiary or to the estate or 
trust as provided in sections 218 and 219, but at 
the rates and in the manner provided in subdivi- 
sion (b) of this section. 



Normal tax 



Part II. — Individuals. 

Normal Tax. 

Sec. 210. That, in lieu of the tax imposed by 
section 210 of the Revenue Act of 1918, there shall 
be levied, collected, and paid for each taxable year 
upon the net income of every individual a normal 
tax of 8 per centum of the amount of the net in- 
come in excess of the credits provided in section 
216: Provided, That in the case of a citizen or 
resident of the United States the rate upon the first 
$4,000 of such excess amount shall be 4 per centum. 

16 



Sec. 211 

INCOME TAX— INDIVIDUALS 

Surtax. 

Sec. 211. (a) That, in lieu of the tax imposed f^^i^ 
by section 211 of the Revenue Act of 191 8, but in 
addition to the normal tax imposed by section 210 
of this Act, there shall be levied, collected, and 
paid for each taxable year upon the net income of 
every individual — 

(i) For the calendar year 1921, a surtax equal 
to the sum of the following: 

1 per centum of the amount by M^hich the net 
income exceeds $5,000 and does not exceed $6,000; 

2 per centum of the amount by v^^hich the net 
income exceeds $6,000 and does not exceed $8,000; 

3 per centum of the amount by which the net 
income exceeds $8,000 and does not exceed 
$10,000; 

4 per centum of the amount by which the net 
income exceeds $10,000 and does not exceed 
$12,000; 

5 per centum of the amount by which the net 
income exceeds $12,000 and does not exceed 
$14,000; 

6 per centum of the amount by which the net 
income exceeds $14,000 and does not exceed 
$16,000; 

7 per centum of the amount by which the net 
income exceeds $16,000 and does not exceed 
$18,000; 

8 per centum of the amount by which the net 
income exceeds $18,000 and does not exceed 
$20,000; 

17 



Sec. 211 



REVENUE ACT OF 1921 



Surtaxes for 1921— 9 pcr ccntum of thc amount by which the net 
continued incomc cxcceds $20,000 and does not exceed 

$22,000; 

10 per centum of the amount by which the net 
income exceeds $22,000 and does not exceed 

$24,000 ; 

1 1 per centum of the amount by which the net 
income exceeds $24,000 and does not exceed 
$26,000 ; 

12 per centum of the amount by which the net 
income exceeds $26,000 and does not exceed 
$28,000; 

13 per centum of the amount by which the net 
income exceeds $28,000 and does not exceed 

$30,000; 

14 per centum of the amount by which the net 
income exceeds $30,000 and does not exceed 
$32,000; 

15 per centum of the amount by which the net 
income exceeds $32,000 and does not exceed 
$34,000; 

16 per centum of the amount by which the net 
income exceeds $34,000 and does not exceed 
$36,000; 

17 per centum of the amount by which the net 
income exceeds $36,000 and does not exceed 
$38,000; 

18 per centum of the amount by which the net 
income exceeds $38,000 and does not exceed 
$40,000 ; 

19 per centum of the amount by which the net 
income exceeds $40,000 and does not exceed 

$42,000; 

18 



Sec. 21 
INCOME TAX— INDIVIDUALS 

20 per centum of the amount by which the net surtaxes for 1921- 

• _ 1 J. ^ t « continued 

mcome exceeds $42,000 and does not exceed 
$44,000; 

21 per centum of the amount by which the net 
income exceeds $44,000 and does not exceed 
$46,000 ; 

22 per centum of the amount by which the net 
income exceeds $46,000 and does not exceed 
$48,000; 

23 per centum of the amount by which the net 
income exceeds $48,000 and does not exceed 
$50,000 ; 

24 per centum of the amount by which the net 
income exceeds $50,000 and does not exceed 
$52,000 ; 

25 per centum of the amount by which the net 
income exceeds $52,000 and does not exceed 
$54,000; 

26 per centum of the amount by which the net 
income exceeds $54,000 and does not exceed 
$56,000 ; 

27 per centum of the amount by which the net 
income exceeds $56,000 and does not exceed 
$58,000; 

28 per centum of the amount by which the net 
income exceeds $58,000 and does not exceed 
$60,000 ; 

29 per centum of the amount by which the net 
income exceeds $60,000 and does not exceed 
$62,000 ; 

30 per centum of the amount by which the net 
income exceeds $62,000 and does not exceed 
$64,000 ; 

19 



Sec. 211 

REVENUE ACT OF 1921 

Surtaxes for 1921— J I per ccntum of thc amount by which the net 
income exceeds $64,000 and does not exceed 
$66,000 ; 

32 per centum of the amount by which the net 
income exceeds $66,000 and does not exceed 
$68,000; 

33 per centum of the amount by which the net 
income exceeds $68,000 and does not exceed 
$70,000 ; 

34 per centum of the amount by which the net 
income exceeds $70,000 and does not exceed 
$72,000 ; 

35 per centum of the amount by which the net 
income exceeds $72,000 and does not exceed 
$74,000; 

36 per centum of the amount by which the net 
income exceeds $74,000 and does not exceed 
$76,000; 

37 per centum of the amount by which the net 
income exceeds $76,000 and does not exceed 
$78,000 ; 

38 per centum of the amount by which the net 
income exceeds $78,000 and does not exceed 
$80,000 ; 

39 per centum of the amount by which the net 
income exceeds $80,000 and does not exceed 
$82,000; 

40 per centum of the amount by which the net 
income exceeds $82,000 and does not exceed 
$84,000 ; 

41 per centum of the amount by which the net 
income exceeds $84,000 and does not exceed 
$86,000 ; 

20 



Sec. 211 



INCOME TAX— INDIVIDUALS 



42 per centum of the amount by which the net sunaxe. for 1921- 

. 1 r> X < continued 

income exceed $86,000 and does not exceed 
$88,000; 

43 per centum of the amount by which the net 
income exceeds $88,000 and does not exceed 
$90,000 ; 

44 per centum of the amount by which the net 
income exceeds $90,000 and does not exceed 
$92,000; 

45 per centum of the amount by which the net 
income exceeds $92,000 and does not exceed 
$94,000 ; 

46 per centum of the amount by which the net 
income exceeds $94,000 and does not exceed 
$96,000 ; 

47 per centum of the amount by which the net 
income exceeds $96,000 and does not exceed 
$98,000 ; 

48 per centum of the amount by which the net 
income exceeds $98,000 and does not exceed 
$100,000; 

52 per centum of the amount by which the net 
income exceeds $100,000 and does not exceed 
$150,000; 

56 per centum of the amount by which the net 
income exceeds $150,000 and does not exceed 
$200,000; 

60 per centum of the amount by which the net 
income exceeds $200,000 and does not exceed 
$300,000 ; 

63 per centum of the amount by which the net 
income exceeds $300,000 and does not exceed 
$500,000 ; 

21 



Sec. 211 



REVENUE ACT OF 1921 



64 per centum of the amount by which the net 
income exceeds $500,000 and does not exceed 
$1,000,000; 

65 per centum of the amount by which the net 
income exceeds $1,000,000; 

fsiVand'" (2) For the calendar year 1922 and each cal- 

thereafter cndar ycar thereafter, a surtax equal to the sum 

of the following: 

1 per centum of the amount by which the net 
income exceeds $6,000 and does not exceed 
$10,000; 

2 per centum of the amount by which the net 
income exceeds $10,000 and does not exceed 
$12,000; 

3 per centum of the amount by which the net 
income exceeds $12,000 and does not exceed 
$14,000; 

4 per centum of the amount by which the net 
income exceeds $14,000 and does not exceed 
$16,000; 

5 per centum of the amount by which the net 
income exceeds $16,000 and does not exceed 
$18,000; 

6 per centum of the amount by which the net 
income exceeds $18,000 and does not exceed 
$20,000 ; 

8 per centum of the amount by which the net 
income exceeds $20,000 and does not exceed 

$22,000; 

9 per centum of the amount by which the net 
income exceeds $22,000 and does not exceed 
$24,000 ; 

22 



Sec. 211 



INCOME TAX— INDIVIDUALS 



10 per centum of the amount by which the net f;;??K'J:ftlr- 
income exceeds $24,000 and does not exceed '=°""""""* 
$26,000 ; 

1 1 per centum of the amount by which the net 
income exceeds $26,000 and does not exceed 
$28,000; 

12 per centum of the amount by which the net 
income exceeds $28,000 and does not exceed 
$30,000; 

13 per centum of the amount by which the net 
income exceeds $30,000 and does not exceed 
$32,000; 

15 per centum of the amount by which the net 
income exceeds $32,000 and does not exceed 
$36,000; 

16 per centum of the amount by which the net 
income exceeds $36,000 and does not exceed 
$38,000; 

17 per centum of the amount by which the net 
income exceeds $38,000 and does not exceed 
$40,000 ; 

18 per centum of the amount by which the net 
income exceeds $40,000 and does not exceed 
$42,000 ; 

19 per centum of the amount by which the net 
income exceeds $42,000 and does not exceed 
$44,000 ; 

20 per centum of the amount by which the net 
income exceeds $44,000 and does not exceed 
$46,000 ; 

21 per centum of the amount by which the net 
income exceeds $46,000 and does not exceed 
$48,000 ; 

23 



Sec. 211 

REVENUE ACT OF 1921 
Surtaxes for 1922 22 pcr ccntum of thc amouiit by which the net 

and thereafter — ^ - , ■' j 

continued income exceeds $48,000 and does not exceed 

$50,000 ; 

23 per centum of the amount by which the net 
income exceeds $50,000 and does not exceed 
$52,000; 

24 per centum of the amount by which the net 
income exceeds $52,000 and does not exceed 
$54,000; 

25 per centum of the amount by which the net 
income exceeds $54,000 and does not exceed 
$56,000; 

26 per centum of the amount by which the net 
income exceeds $56,000 and does not exceed 
$58,000; 

27 per centum of the amount by which the net 
income exceeds $58,000 and does not exceed 
$60,000; 

28 per centum of the amount by which the net 
income exceeds $60,000 and does not exceed 
$62,000; 

29 per centum of the amount by which the net 
income exceeds $62,000 and does not exceed 
$64,000 ; 

30 per centum of the amount by which the net 
income exceeds $64,000 and does not exceed 
$66,000 ; 

31 per centum of the amount by which the net 
income exceeds $66,000 and does not exceed 
$68,000; 

32 per centum of the amount by which the net 
income exceeds $68,000 and does not exceed 
$70,000 ; 

24 



Sec. 211 
INCOME TAX— INDIVIDUALS 

33 per centum of the amount by which the net surtaxes for wzz 

-^ and thereafter — 

income exceeds $70,000 and does not exceed continued 
$72,000; 

34 per centum of the amount by which the net 
income exceeds $72,000 and does not exceed 
$74,000; 

35 per centum of the amount by which the net 
income exceeds $74,000 and does not exceed 
$76,000 ; 

36 per centum of the amount by which the net 
income exceeds $76,000 and does not exceed 
$78,000 ; 

37 per centum of the amount by which the net 
income exceeds $78,000 and does not exceed 
$80,000 ; 

38 per centum of the amount by which the net 
income exceeds $80,000 and does not exceed 
$82,000; 

39 per centum of the amount by which the net 
income exceeds $82,000 and does not exceed 
$84,000 ; 

40 per centum of the amount bv which the net 
income exceeds $84,000 and does not exceed 
$86,000 ; 

41 per centum of the amount by which the net 
income exceeds $86,000 and does not exceed 
$88,000; 

42 per centum of the amount by which the net 
income exceeds $88,000 and does not exceed 
$90,000 ; 

43 per centum of the amount by which the net 
income exceeds $90,000 and does not exceed 
$92,000 ; 

25 



Sec. 212 



Surtaxes for 1922 
and thereafter — 
continued 



Tax limited on 
sale of natural 
resources 



"Not income" 
defined 



REVENUE ACT OF 1921 

44 per centum of the amount by which the net 
income exceeds $92,000 and does not exceed 
$94,000; 

45 per centum of the amount by which the net 
income exceeds $94,000 and does not exceed 
$96,000 ; 

46 per centum of the amount by which the net 
income exceeds $96,000 and does not exceed 
$98,000 ; 

47 per centum of the amount by which the net 
income exceeds $98,000 and does not exceed 
$100,000; 

48 per centum of the amount by which the net 
income exceeds $100,000 and does not exceed 
$ 1 50,000 ; 

49 per centum of the amount by which the net 
income exceeds $150,000 and does not exceed 
$200,000 ; 

50 per centum of the amount by which the net 
income exceeds $200,000. 

(b) in the case of a bona fide sale of mines, oil 
or gas wells, or any interest therein, where the 
principal value of the property has been demon- 
strated by prospecting or exploration and dis- 
covery work done by the taxpayer, the portion of 
the tax imposed by this section attributable to 
such sale shall not exceed, for the calendar year 
1 92 1, 20 per centum, and for each calendar year 
thereafter 16 per centum, of the selling price of 
such property or interest. 

Net Income of Individuals Defined. 

Sec. 21 2. (a) That in the case of an individual 
the term "net income" means the gross income as 

26 



Sec. 213 
INCOME TAX— INDIVIDUALS 

defined in section 213, less the deductions allowed 
by section 214. 

(b) The net income shall be computed upon Ba.i.ofnet 
the basis of the taxpayer's annual accounting per- '""'""' 
iod (fiscal year or calendar year, as the case may 

be) in accordance with the method of accounting 
regularly employed in keeping the books of such 
taxpayer; but if no such method of accounting has 
been so employed, or if the method employed does 
not clearly reflect the income, the computation 
shall be made upon such basis and in such manner 
as in the opinion of the Commissioner does clearly 
reflect the income. If the taxpayer's annual ac- 
counting period is other than a fiscal year as de- 
fined in section 200 or if the taxpayer has no an- 
nual accounting period or does not keep books, the 
net income shall be computed on the basis of the 
calendar year. 

(c) If a taxpayer changes his accounting period ^^S™"5'"^ """""' 
from fiscal year to calendar year, from calendar 

year to fiscal year, or from one fiscal year to an- 
other, the net income shall, with the approval of 
the Commissioner, be computed on the basis of 
such new accounting period, subject to the pro- 
visions of section 226. 

Gross Income Defined. 

Sec. 213. That for the purposes of this title 
(except as otherwise provided in section 233) the 
term "gross income" — 

(a) Includes gains, profits, and income derived -^^"dei""""" 
from salaries, wages, or compensation for per- 
sonal service (including in the case of the Presi- 
dent of the United States, the judges of the Su- 

27 



Sec. 213 



Exempt income 



Insurance 
exempt 



Returned premiums 
exempt 



Gifts, bequests 
and devises 
exempt 



REVENUE ACT OF 1921 

preme and inferior courts of the United States, 
and all other officers and employees, whether 
elected or appointed, of the United States, Alaska, 
Hawaii, or any political subdivision thereof, or 
the District of Columbia, the compensation re- 
ceived as such), of whatever kind and in what- 
ever form paid, or from professions, vocations, 
trades, businesses, commerce, or sales, or dealings 
in property, whether real or personal, growing out 
of the ownership or use of or interest in such prop- 
erty; also from interest, rent, dividends, securities, 
or the transaction of any business carried on for 
gain or profit, or gains or profits and income de- 
rived from any source whatever. The amount of 
all such items (except as provided in subdivision 
(e) of section 201) shall be included in the gross 
income for the taxable year in which received by 
the taxpayer, unless, under methods of accounting 
permitted under subdivision (b) of section 212, 
any such amounts are to be properly accounted for 
as of a different period ; but 

(b) Does not include the following items, which 
shall be exempt from taxation under this title: 

( 1 ) The proceeds of life insurance policies paid 
upon the death of the insured; 

(2) The amount received by the insured as a 
return of premium or premiums, paid by him 
under life insurance, endowment, or annuity con- 
tracts, either during the term or at the maturity of 
the term mentioned in the contract or upon sur- 
render of the contract; 

(3) The value of property acquired by gift, be- 
quest, devise, or descent (but the income from such 
property shall be included in gross income) ; 

28 



Sec. 213 



INCOME TAX— INDIVIDUALS 



(4) Interest upon (a) the obligations of a State, interest .x.mpt 
Territory, or any political subdivision thereof, or 

the District of Columbia; or (b) securities issued 
under the provisions of the Federal Farm Loan 
Act of July 17, 1916; or (c) the obligations of the 
United States or its possessions; or (d) bonds is- 
sued by the War Finance Corporation. In the case 
of obligations of the United States issued after 
September i, 1917 (other than postal savings cer- 
tificates of deposit) , and in the case of bonds issued 
by the War Finance Corporation, the interest shall 
be exempt only if and to the extent provided in the 
respective Acts authorizing the issue thereof as 
amended and supplemented, and shall be excluded 
from gross income only if and to the extent it is 
wholly exempt to the taxpayer from income, war- 
profits and excess-profits taxes; 

(5) The income of foreign governments re- ]^^°^^°' 
ceived from investments in the United States in governments 
stocks, bonds, or other domestic securities, owned 

by such foreign governments, or from interest on 
deposits in banks in the United States of moneys 
belonging to such foreign governments, or from 
any other source within the United States ; 

(6) Amounts received, through accident or Accident and 

I ^ f . ^ , , health insurance 

health insurance or under workmen s compensa- 
tion acts, as compensation for personal injuries or 
sickness, plus the amount of any damages received 
whether by suit or agreement on account of such 
injuries or sickness; 

(7) Income derived from any public utility or income of 

^ a. «« 1/** ot^ces And 

the exercise of any essential govermental function territories 
and accruing to any State, Territory, or the Dis- 
trict of Columbia, or any political subdivision of a 
State or Territory, or income accruing to the Gov- 

29 



Sec. 213 



Contracts to operate 
public utilities for a 
State or political sub- 
division 



Income of 
nonresidents from 
foreign ships 



War risk 

insurance, and 
pensions from the 
U. S. for service 



REVENUE ACT OF 1921 

ernment of any possession of the United States, or 
any political subdivision thereof. 

Whenever any State, Territory, or the District 
of Columbia, or any political subdivision of a State 
or Territory, prior to September 8, 1916, entered 
in good faith into a contract with any person, the 
object and purpose of which is to acquire, con- 
struct, operate, or maintain a public utility, no tax 
shall be levied under the provisions of this title 
upon the income derived from the operation of 
such public utility, so far as the payment thereof 
will impose a loss or burden upon such State, Ter- 
ritory, District of Columbia, or political subdivi- 
sion; but this provision is not intended and shall 
not be construed to confer upon such person any 
financial gain or exemption or to relieve such 
person from the payment of a tax as provided for 
in this title upon the part or portion of such in- 
come to which such person is entitled under such 
contract; 

(8) The income of a nonresident alien or for- 
eign corporation which consists exclusively of 
earnings derived from the operation of a ship or 
ships documented under the laws of a foreign 
country which grants an equivalent exemption to 
citizens of the United States and to corporations 
organized in the United States; 

(9) Amounts received as compensation, family 
allotments and allowances under the provisions of 
the War Risk Insurance and the Vocational Re- 
habilitation Acts, or as pensions from the United 
States for service of the beneficiary or another in 
the military or naval forces of the United States 
in time of war; 



30 



Sec. 214 
INCOME TAX— INDIVIDUALS 

(10) So much of the amount received by an in- bui'dtAganTioan 
dividual after December 31, 1921, .and before "•<><=»«»"• 
January i, 1927, as dividends or interest from 
domestic building and loan associations, operated 
exclusively for the purpose of making loans to 
members, as does not exceed $300; 

(11) The rental value of a dwelling house and S'liSlutir-t 
appurtenances thereof furnished to a minister of ^°""' 

the gospel as part of his compensation ; 

(12) The receipts of shipowners' mutual pro- i^demnuy'""™'"' 
tection and indemnity associations, not organized ''"°'="«<>"'' 

for profit, and no part of the net earnings of which 
inures to the benefit of any private stockholder or 
member, but such corporations shall be subject 
as other persons to the tax upon their net income 
from interest, dividends, and rents. 

(c) In the case of a nonresident alien individual, gtos* income 

\ ' 'of nonresident 

gross income means only the gross income from ""o" individual 
sources within the United States, determined under 
the provisions of section 217. 

Deductions Allowed Individuals. 

Sec. 214. (a) That in computing net income Deduction, 
there shall be allowed as deductions : 

( I ) All the ordinary and necessary expenses |^p?",7,' °' 
paid or incurred during the taxable year in carry- 
ing on any trade or business, including a reasonable 
allowance for salaries or other compensation for 
personal services actually rendered; traveling ex- 
penses (including the entire amount expended for 
meals and lodging) while away from home in pur- 
suit of a trade or business ; and rentals or other pay- 
ments required to be made as a condition to the 
continued use or possession, for purposes of the 

31 



Sec. 214 



'nterest 
leductiblo 



Taxes 

led uct ibis 



^osses in 
tusineas 



<08ses on 
ransactions 
ntered into 
or profit 



REVENUE ACT OF 1921 

trade or business, of property to which the taxpayer 
has not taken or is not taking title or in which he 
has no equity; 

(2) All interest paid or accrued within the tax- 
able year on indebtedness, except on indebtedness 
incurred or continued to purchase or carry obliga- 
tions or securities (other than obligations of the 
United States issued after September 24, 1917, and 
originally subscribed for by the taxpayer) the in- 
terest upon which is wholly exempt from taxation 
under this title; 

(3) Taxes paid or accrued within the taxable 
year except (a) income, war-profits, and excess- 
profits taxes imposed by the authority of the United 
States, (b) so much of the income, war-profits and 
excess-profits taxes, imposed by the authority of 
any foreign country or possession of the United 
States, as is allowed as a credit under section 222, 
(c) taxes assessed against local benefits of a kind 
tending to increase the value of the property as- 
sessed, and (d) taxes imposed upon the taxpayer 
upon his interest as shareholder or member of a 
corporation, which are paid by the corporation 
without reimbursement from the taxpayer. For 
the purpose of this paragraph estate, inheritance, 
legacy, and succession taxes accrue on the due date 
thereof except as otherwise provided by the law 
of the jurisdiction imposing such taxes; 

(4) Losses sustained during the taxable year 
and not compensated for by insurance or other- 
wise, if incurred in trade or business; 

(5) Losses sustained during the taxable year 
and not compensated for by insurance or other- 
wise, if incurred in any transaction entered into 



32 



Sec. 214 



INCOME TAX— INDIVIDUALS 

for profit, though not connected with the trade or 
business ; but in the case of a nonresident alien in- 
dividual only if and to the extent that the profit, if 
such transaction had resulted in a profit, would be 
taxable under this title. No deduction shall be 
allowed under this paragraph for any loss claimed 
to have been sustained in any sale or other disposi- 
tion of shares of stock or securities made after the 
passage of this Act where it appears that within 
thirty days before or after the date of such sale or 
other disposition the taxpayer has acquired (other- 
wise than by bequest or inheritance) substantially 
identical property, and the property so acquired is 
held by the taxpayer for any period after such sale 
or other disposition. If such acquisition is to the 
extent of part only of substantially identical prop- 
erty, then only a proportionate part of the loss shall 
be disallowed; 

(6) Losses sustained during the taxable year Lo.8e«from 

- i>ii 11* ^>*0 and othei 

of property not connected with the trade or busi- ca8uaity 
ness (but in the case of a nonresident alien individ- 
ual only property within the United States) if 
arising from fires, storms, shipwreck, or other cas- 
ualty, or from theft, and if not compensated for by 
insurance or otherwise. Losses allowed under par- 
agraph (4), (5), and (6) of this subdivision shall 
be deducted as of the taxable year in which sus- 
tained unless, in order to clearly reflect the income, 
the loss should, in the opinion of the Commission- 
er, be accounted for as of a different period. In 
case of losses arising from destruction of or damage 
to property, where the property so destroyed or 
damaged was acquired before March i, 191 3, the 
deduction shall be computed upon the basis of its 
fair market price or value as of March i, 1913 ; 

33 



Sec. 214 



Bad debts 



Depreciation and 
obsolescence 



Amortization of 
war facilities 



REVENUE ACT OF 1921 

(7) Debts ascertained to be worthless and 
charged off within the taxable year (or, in the dis- 
cretion of the Commissioner, a reasonable addi- 
tion to a reserve for bad debts) ; and when satisfied 
that a debt is recoverable only in part, the Com- 
missioner may allow such debt to be charged off 
in part; 

(8) A reasonable allowance for the exhaustion, 
wear and tear of property used in the trade or busi- 
ness, including a reasonable allowance for obsol- 
escence. In the case of such property acquired be- 
fore March i, 191 3, this deduction shall be com- 
puted upon the basis of its fair market price or 
value as of March i, 1913; 

(9) In the case of buildings, machinery, equip- 
ment, or other facilities, constructed, erected, in- 
stalled, or acquired, on or after April 6, 1917, for 
the production of articles contributing to the pros- 
ecution of the war against the German Govern- 
ment, and in the case of vessels constructed or ac- 
quired on or after such date for the transporta- 
tion of articles or men contributing to the pros- 
ecution of such war, there shall be allowed, for 
any taxable year ending before March 3, 1924 (if 
claim therefor was made at the time of filing re- 
turn for the taxable year 191 8, 1919, i920,or 1921), 
a reasonable deduction for the amortization of 
such part of the cost of such facilities or vessels 
as has been borne by the taxpayer, but not again in- 
cluding any amount otherwise allowed under this 
title or previous Act of Congress as a deduction 
in computing net income. At any time before 
March 3, 1924, the Commissioner may, and at the 
request of the taxpayer shall, reexamine the return 
and if he then finds as a result of an appraisal or 



34 



Sec. 214 

INCOME TAX— INDIVIDUALS 

from other evidence that the deduction originally 
allowed was incorrect, the income, war-profits, and 
excess-profits taxes for the year or years aflfected 
shall be redetermined ; and the amount of tax due 
upon such redetermination, if any, shall be paid 
upon notice and demand by the collector, or the 
amount of tax overpaid, if any, shall be credited 
or refunded to the taxpayer in accordance with the 
provisions of section 252 ; 

(ro) In the case of mines, oil and gas wells, °:t''«arr".°ourc.. 
other natural deposits, and timber, a reasonable 
allowance for depletion and for depreciation of 
improvements, according to the peculiar conditions 
in each case, based upon cost including cost of de- 
velopment not otherwise deducted: Provided, 
That in the case of such properties acquired prior 
to March i, 1913, the fair market value of the 
property (or the taxpayer's interest therein) on 
that date shall be taken in lieu of cost up to that 
date : Provided further, That in the case of mines, 
oil and gas wells, discovered by the taxpayer, on 
or after March i, 191 3, and not acquired as the 
result of purchase of a proven tract or lease, where 
the fair market value of the property is materially 
disproportionate to the cost, the depletion allow- 
ance shall be based upon the fair market value 
of the property at the date of the discovery, or 
within thirty days thereafter : And provided fur- 
ther. That such depletion allowance based on dis- 
covery value shall not exceed the net income, com- 
puted without allowance for depletion, from the 
property upon which the discovery is made, ex- 
cept where such net income so computed is less 
than the depletion allowance based on cost or fair 
market value as of March i, 191 3 ; such reasonable 
allowance in all the above cases to be made under 

35 



Sec. 214 



Contributiona 



REVENUE ACT OF 1921 

rules and regulations to be prescribed by the Com- 
missioner, with the approval of the Secretary. 
In the case of leases the deductions allowed by this 
paragraph shall be equitably apportioned between 
the lessor and lessee; 

(ii) Contributions or gifts made within the 
taxable year to or for the use of: (A) The United 
States, any State, Territory, or any political sub- 
division thereof, or the District of Columbia, for 
exclusively public purposes ; (B) any corporation, 
or community chest, fund, or foundation, organ- 
ized and operated exclusively for religious, charit- 
able, scientific, literary, or educational purposes, 
including posts of the American Legion or the 
Women's Auxiliary units thereof, or for the pre- 
vention of cruelty to children or animals, no part 
of the net earnings of which inures to the benefit 
of any private stockholder or individual; or (C) 
the special fund for vocational rehabilitation auth- 
orized by section 7 of the Vocational Rehabilita- 
tion Act; to an amount which in all the above 
cases combined does not exceed 15 per centum of 
the taxpayer's net income as computed without the 
benefit of this paragraph. In case of a nonresident 
alien individual this deduction shall be allowed 
only as to contributions or gifts made to domestic 
corporations, or to community chests, funds, or 
foundations, created in the United States, or to 
such vocational rehabilitation fund. Such contrib- 
utions or gifts shall be allowable as deductions only 
if verified under rules and regulations prescribed 
by the Commissioner, with the approval of the 
Secretary; 

(12) If property is compulsorily or involun- 
tarily converted into cash or its equivalent as a re- 

36 



Sec. 214 



INCOME TAX— INDIVIDUALS 

suit of (A) its destruction in whole or in part, (B) 
theft or seizure, or (C) an exercise of the power of 
requisition or condemnation, or the threat or im- 
minence thereof; and if the taxpayer proceeds 
forthwith in good faith, under regulations pre- 
scribed by the Commissioner with the approval 
of the Secretary, to expend the proceeds of such 
conversion in the acquisition of other property of 
a character similar or related in service or use to 
the property so converted, or in the acquisition of 
80 per centum or more of the stock or shares of a 
corporation owning such other property, or in the 
establishment of a replacement fund, then there 
shall be allowed as a deduction such portion of the 
gain derived as the portion of the proceeds so ex- 
pended bears to the entire proceeds. The provi- 
sions of this paragraph prescribing the conditions 
under which a deduction may be taken in respect 
of the proceeds or gains derived from the compul- 
sory or involuntary conversion of property into 
cash or its equivalent, shall apply so far as may be 
practicable to the exemption or exclusion of such 
proceeds or gains from gross income under prior 
income, war-profits and excess-profits tax acts. 

(b) In the case of a nonresident alien individual, ?onre"denV°' 
the deductions allowed in subdivision (a), except "'"" 
those allowed in paragraphs (5), (6), and (11), 
shall be allowed only if and to the extent that they 
are connected with income from sources within 
the United States; and the proper apportionment 
and allocation of the deductions with respect to 
sources of income within and without the United 
States shall be determined as provided in section 
217 under rules and regulations prescribed by the 
Commissioner with the approval of the Secretary. 

37 



Sec. 215 



REVENUE ACT OF 1921 

In the case of a citizen entitled to the benefits of 
section 262 the deductions shall be the same and 
shall be determined in the same manner as in the 
case of a nonresident alien individual. 



Items not 
deductible 



Personal 
expenses 

I mprovements 



Restoration of 
property 



Premiums on life 
insurance policies 
for benefit of any- 
one interested in 
trade or business 



Items not Deductible. 

Sec. 215. (a) That in computing net income 
no deduction shall in any case be allowed in respect 
of— 

(i) Personal, living, or family expenses; 

(2) Any amount paid out for new buildings or 
for permanent improvements or betterments made 
to increase the value of any property or estate ; 

(3) Any amount expended in restoring property 
or in making good the exhaustion thereof for 
which an allowance is or has been made; or 

(4) Premiums paid on any life insurance policy 
covering the life of any officer or employee, or of 
any person financially interested in any trade or 
business carried on by the taxpayer, when the tax- 
payer is directly or indirectly a beneficiary under 
such policy. 

(b) Amounts paid under the laws of any State, 
Territory, District of Columbia, possession of the 
United States, or foreign country as income to the 
holder of a life or terminable interest acquired by 
gift, bequest, or inheritance shall not be reduced 
or diminished by any deduction for shrinkage (by 
whatever name called) in the value of such inter- 
est due to the lapse of time, nor by any deduction 
allowed by this Act for the purpose of computing 
the net income of an estate or trust but not allowed 
under the laws of such State, Territory, District of 

38 



Sec. 216 

INCOME TAX— INDIVIDUALS 

Columbia, possession of the United States, or for- 
eign country for the purpose of computing the in- 
come to which such holder is entitled. 

Credits Allowed Individuals. 

Sec. 2i6. That for the purpose of the normal credit, for normal 
tax only there shall be allowed the following cred- 
its: 

(a) The amount received as dividends (i) '"^'''•"<'" 
from a domestic corporation other than a corpora- 
tion entitled to the benefits of section 262, or (2) 

from a foreign corporation when it is shown to 
the satisfaction of the Commissioner that more 
than 50 per centum of the gross income of such 
foreign corporation for the three-year period end- 
ing with the close of its taxable year preceding the 
declaration of such dividends (or for such part of 
such period as the corporation has been in exist- 
ence) was derived from sources within the United 
States as determined under the provisions of sec- 
tion 217; 

(b) The amount received as interest upon ob- 'bHg7Hon"of 
ligations of the United States and bonds issued by """'^ ^'"*" 
the War Finance Corporation, which is included 

in gross income under section 213 ; 

(c) In the case of a single person, a personal e«m^tYons 
exemption of $1,000; or in the case of the head of a 
family or a married person living with husband or 

wife, a personal exemption of $2,500, unless the 
net income is in excess of $5,000, in which case the 
personal exemption shall be $2,000. A husband 
and wife living together shall receive but one per- 
sonal exemption. The amount of such personal 
exemption shall be $2,500, unless the aggregate 
net income of such husband and wife is in excess 

39 



Sec. 217 



Credit for 
dependents 



Nonresident alien 
exemption 



Date exemption 
■8 determined 



Nonresident alien 
income from 
sources in 
United States 



REVENUE ACT OF 1921 

of $5,ooo, in which case the amount of such per- 
sonal exemption shall be $2,000. If such husband 
and wife make separate returns, the personal ex- 
emption may be taken by either or divided be- 
tween them. In no case shall the reduction of the 
personal exemption from $2,500 to $2,000 operate 
to increase the tax, which would be payable if the 
exemption were $2,500, by more than the amount 
of the net income in excess of $5,000; 

(d) $400 for each person (other than husband 
or wife) dependent upon and receiving his chief 
support from the taxpayer if such dependent per- 
son is under eighteen years of age or is incapable 
of self-support because mentally or physically de- 
fective ; 

(e) in the case of a nonresident alien individual 
or of a citizen entitled to the benefits of section 262 
the personal exemption shall be only $1,000, and he 
shall not be entitled to the credit provided in sub- 
division (d). 

(f) The credits allowed by subdivisions (c), 
(d), and (e) of this section shall be determined by 
the status of the taxpayer on the last day of the 
period for which the return of income is made; 
but in the case of an individual who dies during 
the taxable year, such credits shall be determined 
by his status at the time of his death, and in such 
case full credits shall be allowed to the surviving 
spouse, if any, according to his or her status at the 
close of the period for which such survivor makes 
return of income. 

Net Income of Nonresident Alien Individuals. 

Sec. 217. (a) That in the case of a nonresident 
alien individual or of a citizen entitled to the bene- 



40 



Sec. 217 

INCOME TAX— INDIVIDUALS 

fits of section 262, the following items of gross 
income shall be treated as income from sources 
within the United States : 

(i) Interest on bonds, notes, or other interest- bank'dep"uT °" 
bearing obligations of residents, corporate or 
otherwise, not including (A) interest on deposits 
with persons carrying on the banking business paid 
to persons not engaged in business within the 
United States and not having an office or place of 
business therein, or (B) interest received from a 
resident alien individual or a resident foreign cor- 
poration when it is shown to the satisfaction of the 
Commissioner that less than 20 per centum of the 
gross income of such resident payor has been de- 
rived from sources within the United States, as de- 
termined under the provisions of this section, for 
the three-year period ending with the close of the 
taxable year of such payor, or for such part of such 
period immediately preceding the close of such 
taxable year as may be applicable; 

(2) The amount received as dividends (A) from Dividends 
a domestic corporation other than a corporation 
entitled to the benefits of section 262, or (B) from 
a foreign corporation unless less than 50 per 
centum of the gross income of such foreign corpor- 
ation for the three-year period ending with the 
close of its taxable year preceding the declaration 
of such dividends (or for such part of such period 
as the corporation has been in existence) was de- 
rived from sources within the United States as de- 
termined under the provisions of this section; 

(7) Compensation for labor or personal ser- ferWce»"^rformed 
vices performed in the United States ; 

41 



in United States 



Sec. 217 



Rentals and 
royalties in 
United States 



Sales of real 
property in 
United States 



Deductions for 
nonresident alien 
individual 



Income from 
sources without 
United States 



REVENUE ACT OF 1921 

(4) Rentals or royalties from property located 
in the United States or from any interest in such 
property, including rentals or royalties for the use 
of or for the privilege of using in the United 
States, patents, copyrights, secret processes and 
formulas, good will, trade-marks, trade brands, 
franchises, and other like property; and 

(5) Gains, profits, and income from the sale of 
real property located in the United States. 

(b) From the items of gross income specified in 
subdivision (a) there shall be deducted the expen- 
ses, losses, and other deductions properly appor- 
tioned or allocated thereto and a ratable part of any 
expenses, losses, or other deductions which can not 
definitely be allocated to some item or class of gross 
income. The remainder, if any, shall be included 
in full as net income from sources within the 
United States. 

(c) The following items of gross income shall 
be treated as income from sources without the 
United States : 

(i) Interest other than that derived from 
sources within the United States as provided in 
paragraph (i) of subdivision (a); 

(2) Dividends other than those derived from 
sources within the United States as provided in 
paragraph (2) of subdivision (a) ; 

(3) Compensation for labor or personal ser- 
vice performed without the United States; 

(4) Rentals or royalties from property located 
without the United States or from any interest in 
such property, including rentals or royalties for 
the use of or for the privilege of using without the 



42 



: the 



Sec. 217 
INCOME TAX— INDIVIDUALS 

United States, patents, copyrights, secret processes 
and formulas, good will, trade-marks, trade 
brands, franchises, and other like property; and 

(5) Gains, profits, and income from the sale of 
real property located without the United States; 

(d) From the items of gross income specified in P^„"^e^?hou"ti 
subdivision (c) there shall be deducted the ex- """«<« state, 
penses, losses, and other deductions properly ap- 
portioned or allocated thereto, and a ratable part 
of any expenses, losses, or other deductions which 
can not definitely be allocated to some item or class 
of gross income. The remainder, if any, shall be 
treated in full as net income from sources with- 
out the United States. 

(e) Items of gross income, expenses, losses and AUocationot 
deductions, other than those specified in subdivi- deduct'on. 
sions (a) and (c), shall be allocated or appor- 
tioned to sources within or without the United 
States under rules and regulations prescribed by 
the Commissioner with the approval of the Sec- 
retary. Where items of gross income are separ- 
ately allocated to sources within the United States, 
there shall be deducted (for the purpose of com- 
puting the net income therefrom) the expenses, 
losses and other deductions properly apportioned 
or allocated thereto and a ratable part of other ex- 
penses, losses or other deductions which can not 
be definitely allocated to some item or class of gross 
income. The remainder, if any, shall be included 
in full as net income from sources within the 
United States. In the case of gross income derived 
from sources partly within and partly without the 
United States, the net income may first be comput- 
ed by deducting the expenses, losses or other deduc- 
tions apportioned or allocated thereto and a ratable 

43 



Sec. 217 



"Sale" or **BoId" 
defined 



When benefits of 
section 262 are 
allowed for income 
from within United 

States possessions 



REVENUE ACT OF 1921 

part of any expenses, losses or other deductions 
which can not definitely be allocated to some item 
or class of gross income; and the portion of such 
net income attributable to sources within the 
United States may be determined by processes or 
formulas of general apportionment prescribed by 
the Commissioner with the approval of the Sec- 
retary, Gains, profits and income from ( i ) trans- 
portation or other services rendered partly within 
and partly without the United States, or (2) from 
the sale of personal property produced (in whole 
or in part) by the taxpayer within and sold with- 
out the United States, or produced (in whole or in 
part) by the taxpayer without and sold within the 
United States, shall be treated as derived partly 
from sources within and partly from sources with- 
out the United States. Gains, profits and income 
derived from the purchase of personal property 
within and its sale without the United States or 
from the purchase of personal property without 
and its sale within the United States, shall be treat- 
ed as derived entirely from the country in which 
sold. 

(f) As used in this section the words "sale" or 
"sold" include "exchange" or "exchanged"; and 
the word "produced" includes "created," "fabri- 
cated," "manufactured," "extracted," "processed," 
"cured," or "aged." 

(g) A nonresident alien individual or a citizen 
entitled to the benefits of section 262 shall receive 
the benefit of the deductions and credits allowed in 
this title only by filing or causing to be filed with 
the collector a true and accurate return of his total 
income received from all sources corporate or 
otherwise in the United States, in the manner pre- 



44 



Sec. 218 



INCOME TAX— INDIVIDUALS 

scribed in this title; including therein all the in- 
formation which the Commissioner may deem 
necessary for the calculation of such deductions 
and credits : Provided, That the benefit of the 
credit allowed in subdivision (e) of section 216 
may, in the discretion of the Commissioner, be re- 
ceived by filing a claim therefor with the withhold- 
ing agent. In case of failure to file a return, the 
collector shall collect the tax on such income, and 
all property belonging to such nonresident alien in- 
dividual or foreign trader [sic] shall be liable to 
distraint for the tax. 

Partnerships and Personal Service Corporations. 

Sec. 218. (a) That individuals carrying on Partnerships 
business in partnership shall be liable for income 
tax only in their individual capacity. There shall 
be included in computing the net income of each 
partner his distributive share, whether distributed 
or not, of the net income of the partnership for the 
taxable year, or, if his net income for such taxable 
year is computed upon the basis of a period differ- 
ent from that upon the basis of which the net in- 
come of the partnership is computed, then his dis- 
tributive share of the net income of the partnership 
for any accounting period of the partnership end- 
ing within the fiscal or calendar year upon the 
basis of which the partner's net income is com- 
puted. 

(b) The partner shall, for the purpose of the credits to partner 
normal tax, be allowed as credits, in addition to the 
credits allowed to him under section 216, his pro- 
portionate share of such amounts specified in sub- 
divisions (a) and (b) of section 216 as are received 
by the partnership. 

45 



Sec. 218 



Net income of 
partnership 



No deduction 
for contributions 



Personal 

service 
corporations 



REVENUE ACT OF 1921 

(c) The net income of the partnership shall be 
computed in the same manner and on the same 
basis as provided in section 212 except that the de- 
duction provided in paragraph (11) of subdivi- 
sion (a) of section 214 shall not be allowed. 

(d) Personal service corporations shall not be 
subject to taxation under this title, but the individ- 
ual stockholders thereof shall be taxed in the same 
manner as the members of partnerships. All the 
provisions of this title relating to partnerships and 
the members thereof shall so far as practicable 
apply to personal service corporations and the 
stockholders thereof : Provided, That for the pur- 
pose of this subdivision amounts distributed by a 
personal service corporation during its taxable year 
shall be accounted for by the distributees ; and any 
portion of the net income remaining undistributed 
at the close of its taxable year shall be accounted 
for by the stockholders of such corporation at the 
close of its taxable year in proportion to their re- 
spective shares. 

This subdivision shall not be in effect after De- 
cember 31, 1921. In the case of a personal service 
corporation having a fiscal year beginning in 1921 
and ending in 1922, amounts distributed prior to 
January i, 1922, to its stockholders out of earnings 
or profits accumulated after December 31, 1920, 
shall be taxed to the distributees; and the stock- 
holders of record on December 31, 1921, shall be 
taxed upon their distributive shares of the differ- 
ence (if any) between such distributive profits and 
the portion of the corporation's net income assign- 
able to the calendar year 1921, determined in the 
manner provided in clause (i) of subdivision (c) 
of section 205 of this Act. 

46 



Sec. 219 



INCOME TAX— INDIVIDUALS 

Estates and Trusts. 

Sec. 219. (a) That the tax imposed by sec- E«tat«and 
tions 210 and 211 shall apply to the income of es- 
tates or of any kind of property held in trust, in- 
cluding — 

( 1 ) Income received by estates of deceased per- 
sons during the period of administration or settle- 
ment of the estate ; 

(2) Income accumulated in trust for the benefit 
of unborn or unascertained persons or persons with 
contingent interests; 

(3) Income held for future distribution under 
the terms of the will or trust ; and 

(4) Income which is to be distributed to the 
beneficiaries periodically, whether or not at regular 
intervals, and the income collected by a guardian 
of an infant to be held or distributed as the court 
may direct. 

(b) The fiduciary shall be responsible for mak- Fiduciary to 

\ ' -' '^ make returns 

ing the return of income for the estate or trust for 
which he acts. The net income of the estate or trust 
shall be computed in the same manner and on the 
same basis as provided in section 212, except that 
(in lieu of the deduction authorized by paragraph 
(11) of subdivision (a) of section 214) there shall 
also be allowed as a deduction, without limitation, 
any part of the gross income which, pursuant to the 
terms of the will or deed creating the trust, is dur- 
ing the taxable year paid or permanently set aside 
for the purposes and in the manner specified in 
paragraph (11) of subdivision (a) of section 214. 
In cases in which there is any income of the class 
described in paragraph (4) of subdivision (a) of 

47 



Sec. 219 



When fiduciary pays 
the tax 



Credits allowed 
to estate or trust 



Computation in 
cases where 
fiduciary does not 
pay the tax 



REVENUE ACT OF 1921 

this section the fiduciary shall include in the re- 
turn a statement of the income of the estate or trust 
which, pursuant to the instrument or order govern- 
ing the distribution, is distributable to each bene- 
ficiary, whether or not distributed before the close 
of the taxable year for which the return is made. 

(c) In cases under paragraphs (i), (2), or (3) 
of subdivision (a) or in any other case within sub- 
division (a) of this section except paragraph (4) 
thereof the tax shall be imposed upon the net in- 
come of the estate or trust and shall be paid by the 
fiduciary, except that in determining the net in- 
come of the estate of any deceased person during 
the period of administration or settlement there 
may be deducted the amount of any income proper- 
ly paid or credited to any legatee, heir, or other 
beneficiary. In such cases the estate or trust shall, 
for the purpose of the normal tax, be allowed the 
same credits as are allowed to single persons 
under section 216. 

(d) In cases under paragraph (4) of subdivi- 
sion (a) , and in the case of any income of an estate 
during the period of administration or settlement 
permitted by subdivision (c) to be deducted from 
the net income upon which tax is to be paid by the 
fiduciary, the tax shall not be paid by the fiduciary, 
but there shall be included in computing the net 
income of each beneficiary that part of the income 
of the estate or trust for its taxable year which, 
pursuant to the instrument or order governing the 
distribution, is distributable to such beneficiary, 
whether distributed or not, or, if his taxable year is 
dififerent from that of the estate or trust, then there 
shall be included in computing his net income his 
distributive share of the income of the estate or 

48 



Sec. 219 

INCOME TAX— INDIVIDUALS 

trust for its taxable year ending within the taxable 
year of the beneficiary. In such cases the bene- 
ficiary shall, for the purpose of the normal tax, be 
allowed as credits, in addition to the credits al- 
lowed to him under section 216, his proportionate 
share of such amounts specified in subdivisions (a) 
and (b) of section 216 as are received by the 
estate or trust. 

(e) In the case of an estate or trust the income deducHon 
of which consists both of income of the class de- Mu^ary 
scribed in paragraph (4) of subdivision (a) of this 
section and other income, the net income of the 
estate or trust shall be computed and a return 
thereof made by the fiduciary in accordance with 
subdivision (b) and the tax shall be imposed, and 

shall be paid by the fiduciary in accordance with 
subdivision (c), except that there shall be allowed 
as an additional deduction in computing the net in- 
come of the estate or trust that part of its income 
of the class described in paragraph (4) of sub- 
division (a) which, pursuant to the instrument or 
order governing the distribution, is distributable 
during its taxable year to the beneficiaries. In 
cases under this subdivision there shall be in- 
cluded, as provided in subdivision (d) of this sec- 
tion, in computing the net income of each bene- 
ficiary, that part of the income of the estate or trust 
which, pursuant to the instrument or order govern- 
ing the distribution, is distributable during the 
taxable year to such beneficiary. 

(f ) A trust created by an employer as a part of J;r,:,'oV«. 
a stock bonus or profit-sharing plan for the ex- 
clusive benefit of some or all of his employees, to 
which contributions are made by such employer, 

or employees, or both, for the purpose of distribut- 

49 



Sec. 220 



Corporation availed 
of to evade tax 
and penalty 



Stockholders may 
be taxed 



REVENUE ACT OF 1921 

ing to such employees the earnings and principal 
of the fund accumulated by the trust in accordance 
with such plan, shall not be taxable under this sec- 
tion, but the amount actually distributed or made 
available to any distributee shall be taxable to him 
in the year in which so distributed or made avail- 
able to the extent that it exceeds the amounts paid 
in by him. Such distributees shall for the purpose 
of the normal tax be allowed as credits that part 
of the amount so distributed or made available as 
represents the items specified in subdivisions (a) 
and (b) of section 216. 

Evasion of Surtaxes by Incorporation. 

Sec. 220. That if any corporation, however 
created or organized, is formed or availed of for 
the purpose of preventing the imposition of the 
surtax upon its stockholders or members through 
the medium of permitting its gains and profits to 
accumulate instead of being divided or distributed 
there shall be levied, collected, and paid for each 
taxable year upon the net income of such corpora- 
tion a tax equal to 25 per centum of the amount 
thereof, which shall be in addition to the tax im- 
posed by section 230 of this title and shall be com- 
puted, collected, and paid upon the same basis and 
in the same manner and subject to the same pro- 
visions of law, including penalties, as that tax: 
Provided, That if all the stockholders or members 
of such corporation agree thereto, the Commis- 
sioner may, in lieu of all income, war-profits and 
excess-profits taxes imposed upon the corporation 
for the taxable year, tax the stockholders or mem- 
bers of such corporation upon their distributive 
shares in the net income of the corporation for the 
taxable year in the same manner as provided in 



50 



Sec. 221 



INCOME TAX— INDIVIDUALS 

subdivision (a) of section 218 in the case of mem- 
bers of a partnership. The fact that any corpora- 
tion is a mere holding company, or that the gains 
and profits are permitted to accumulate beyond the 
reasonable needs of the business, shall be prima 
facie evidence of a purpose to escape the surtax; 
but the fact that the gains and profits are in any 
case permitted to accumulate and become surplus 
shall not be construed as evidence of a purpose to 
escape the tax in such case unless the Commissioner 
certifies that in his opinion such accumulation is 
unreasonable for the purposes of the business. 
When requested by the Commissioner, or any col- 
lector, every corporation shall forward to him a 
correct statement of such gains and profits and 
the names and addresses of the individuals or 
shareholders who would be entitled to the same if 
divided or distributed, and of the amounts that 
would be payable to each. 

Payment of Individual's Tax at Source. 

Sec. 221. (a) That all individuals, corpora- r?rur«°'*" 
tions, and partnerships, in whatever capacity act- 
ing, including lessees or mortgagors of real or 
personal property, fiduciaries, emplovers. and all 
officers and employees of the United States having 
the control, receipt, custody, disposal, or payment 
of interest (except interest on deposits with persons 
carrying on the banking business paid to persons 
not engaged in business in the United States and 
not having an office or place of business therein), 
rent, salaries, wages, premiums, annuities, com- 
pensations, remunerations, emoluments, or other 
fixed or determinable annual or periodical gains, 
profits, and income, of any nonresident alien in- 
dividual or partnership composed in whole or in 

51 



Sec. 221 



Withholding 
of tax 



Tax free covenant 

obligations 

2 % withheld 



REVENUE ACT OF 1921 

part of nonresident aliens (other than income re- 
ceived as dividends of the class allowed as a credit 
by subdivision (a) of section 216) shall (except in 
the cases provided for in subdivision (b) and ex- 
cept as otherw^ise provided in regulations pre- 
scribed by the Commissioner under section 217) 
deduct and withold from such annual or period- 
ical gains, profits, and income a tax equal to 8 per 
centum thereof : Provided, That the Commission- 
er may authorize such tax to be deducted and with- 
held from the interest upon any securities the own- 
ers of which are not known to the withholding 
agent. 

(b) In any case where bonds, mortgages, or 
deeds of trust, or other similar obligations of a cor- 
poration contain a contract or provision by which 
the obligor agrees to pay any portion of the tax 
imposed by this title upon the obligee, or to re- 
imburse the obligee for any portion of the tax, or 
to pay the interest without deduction for any tax 
which the obligor may be required or permitted 
to pay thereon, or to retain therefrom under any 
law of the United States, the obligor shall deduct 
and withhold a tax equal to 2 per centum of the 
interest upon such bonds, mortgages, deeds of trust, 
or other obligations, whether such interest is pay- 
able annually or at shorter or longer periods and 
whether payable to a nonresident alien individual 
or to an individual citizen or resident of the United 
States or to a partnership : Provided, That the 
Commissioner may authorize such tax to be de- 
ducted and withheld in the case of interest upon 
any such bonds, mortgages, deeds of trust, or other 
obligations, the owners of which are not known to 
the withholding agent. Such deductions and with- 
holding shall not be required in the case of a citizen 



52 



Sec. 221 
INCOME TAX— INDIVIDUALS 

or resident entitled to receive such interest, if he 
files with the withholding agent on or before Feb- 
ruary I a signed notice in writing claiming the 
benefit of the credits provided in subdivisions (c) 
and (d) of section 216; nor in the case of a non- 
resident alien individual if so provided for in reg- 
ulations prescribed by the Commissioner under 
subdivision (g) of section 217. 

(c) Every individual, corporation, or partner- Retumoftax 

, r ' . ■', 1 , ,.,,,, ^ withheld March 1 

ship required to deduct and withhold any tax un- 
der this section shall make return thereof on or 
before March i of each year and shall on or before 
June 15 pay the tax to the official of the United Tax due June is 
States government authorized to receive it. Every 
such individual, corporation, or partnership is' 
hereby made liable for such tax and is hereby in- 
demnified against the claims and demands of any 
individual, corporation, or partnership for the 
amount of any payments made in accordance with 
the provisions of this section. 

(d) Income upon which any tax is required to Recipient to include 

,^' / !•• • in'" return amount 

be Withheld at the source under this section shall on which tax is 

withheld 

be included in the return of the recipient of such 
income, but any amount of tax so withheld shall be 
credited against the amount of income tax as com- 
puted in such return. 

(e) If any tax required under thi's section to be Jere'^oifeltedfrom 
deducted and withheld is paid by the recipient of witi>hoi<ii"B =sent 
the income, it shall not be recollected from the 
withholding agent; nor in cases in which the tax 

is so paid shall any penalty be imposed upon or 
collected from the recipient of the income or the 
withholding agent for failure to return or pay 
the same, unless such failure was fraudulent and 
for the purpose of evading payment. 

53 



Sec. 222 



Credits for taxes 
to individuals 



Citizens 



Residents 



Alien residents 



Partners and 
beneficiaries 



Credit not allowed 
when entitled to 
benefits of section 
262 (income from 
within U. 5. 
possessions) 



REVENUE ACT OF 1921 
Credit for Taxes in Case of Individuals. 

Sec. 222. (a) That the tax computed under 
Part II of this title shall be credited with : 

( 1 ) In the case of a citizen of the United States 
the amount of any income, war-profits and excess- 
profits taxes paid during the taxable year to any 
jforeign country or to any possession of the United 
States; and 

(2) In the case of a resident of the United 
States, the amount of any such taxes paid during 
the taxable year to any possession of the United 
States ; and 

(3) In the case of an alien resident of the 
United States, the amount of any such taxes paid 
during the taxable year to any foreign country, if 
the foreign country of which such alien resident is 
a citizen or subject, in imposing such taxes, allows 
a similar credit to citizens of the United States re- 
siding in such country; and 

(4) In the case of any such individual who is a 
member of a partnership or a beneficiary of an 
estate or trust, his proportionate share of such taxes 
of the partnership or the estate or trust paid during 
the taxable year to a foreign country or to any 
possession of the United States, as the case may be. 

(5) The above credits shall not be allowed in 
the case of a citizen entitled to the benefits of sec- 
tion 262 ; and in no other case shall the amount of 
credit taken under this subdivision exceed tTie same 
proportion of the tax, against which such credit is 
taken, which the taxpayer's net income (computed 
without deduction for any income; war-profits 
and excess-profits taxes imposed by any foreign 



54 



Sec. 222 
INCOME TAX— INDIVIDUALS 

country or possession of the United States) from 
sources without the United States bears to his en- 
tire net income (computed without such deduc- 
tion) for the same taxable year. 

(b) If accrued taxes when paid differ from the d^^"re',;!^e"be?ween 
amounts claimed as credits by the taxpayer, or if creditscuimelj 
any tax paid is refunded in whole or in part, the 

taxpayer shall notify the Commissioner, who shall 
redetermine the amount of the tax due under Part 
II of this title for the year or years affected, and 
the amount of tax due upon such redetermination, 
if any, shall be paid by the taxpayer upon notice 
and demand by the collector, or the amount of tax 
overpaid, if any, shall be credited or refunded to 
the taxpayer in accordance with the provisions of 
section 2C2. In the case of such a tax accrued but Bond maybe 

•J required 

not paid, the Commissioner as a condition preced- 
ent to the allowance of this credit may require the 
taxpayer to give a bond with sureties satisfactory 
to and to be approved by the Commissioner in 
such penal sum as the Commissioner may require, 
conditioned for the payment by the taxpayer of 
any amount of tax found due upon any such rede- 
termination ; and the bond herein prescribed shall 
contain such further conditions as the Commis- 
sioner may require. 

(c) These credits shall be allowed only if the ^^^jf„''„'=„'f^^ 
taxpayer furnishes evidence satisfactory to the """"' 
Commissioner showing the amount of income de- 
rived from sources without the United States, and 

all other information necessary for the verification 
and computation of such credits. 

(d) If the taxpayer makes a return for a fiscal ^Hf^^^^^J'"'^ 
year beginning in 1920 and ending in 1921, the 

credit for the entire fiscal year shall, notwithstand- 

55 



Sec. 223 



REVENUE ACT OF 1921 



ing any provision of this Act, be determined under 
the provisions of this section; and the Commission- 
er is authorized to disallow, in whole or part, any 
such credit which he finds has already been taken 
by the taxpayer. 



Returns by 
individuals 



$1,000 net income 
for sing^le person 



$2,000 net income 
for married 
person 



For gross incomes 
of $5,000 or over 



For married persons 
with net taxable 
income of $2,000 



Returns may be 
joint or separate 



When agent shall 
make return 



Individual Returns. 

Sec. 223. (a) That the following individuals 
shall each make under oath a return stating speci- 
fically the items of his gross income and the de- 
ductions and credits allowed under this title — 

( 1 ) Every individual having a net income for 
the taxable year of $i,ooo or over, if single, or if 
married and not living with husband or wife; 

(2) Every individual having a net income for 
the taxable year of $2,000 or over, if married and 
living with husband or wife ; and 

(3) Every individual having a gross income for 
the taxable year of $5,000 or over, regardless of 
the amount of his net income. 

(b) If a husband and wife living together have 
an aggregate net income for the taxable year of 
$2,000 or over, or an aggregate gross income for 
such year of $5,000 or over — 

( 1 ) Each shall make such a return, or 

(2) The income of each shall be included in a 
single joint return, in which case the tax shall be 
computed on the aggregate income. 

(c) If the taxpayer is unable to make his own 
return, the return shall be made by a duly author- 
ized agent or by the guardian or other person 
charged with the care of the person or property of 
such taxpayer. 

56 



Sees. 224, 225 

INCOME TAX— INDIVIDUALS 

Partnership Returns. 

Sec. 224. That every partnership shall make a f"^^;'''*^ 
return for each taxable year, stating specifically " ""' 
the items of its gross income and the deductions 
allowed by this title, and shall include in the return 
the names and addresses of the individuals who 
would be entitled to share in the net income if dis- 
tributed and the amount of the distributive share 
of each individual. The return shall be sworn to 
by any one of the partners. 

Fiduciary Returns. 

Sec. 225. (a) That every fiduciary (except a Fiduciary retu™. 
receiver appointed by authority of law in posses- 
sion of part only of the property of an individual) 
shall make under oath a return for any of the fol- 
lowing individuals, estates, or trusts for which he 
acts, stating specifically the items of gross income 
thereof and the deductions and credits allowed 
under this title — 

(i) Every individual having a net income for 
the taxable year of $1,000 or over, if single, or if 
married and not living with husband or wife; 

(2) Every individual having a net income for 
the taxable year of $2,000 or over, if married and 
living with husband or wife ; 

(3) Every individual having a gross income for 
the taxable year of $5,006 or over, regardless of the 
amount of his net income ; 

(4) Every estate or trust the net income of 
which for the taxable year is $r,ooo or over; and 

(5) Every estate or trust of which any benefic- 
iary is a nonresident alien. 

57 



Sec. 226 



Regulations for 
fiduciary returns 



Fiduciaries subject 
to provisions for 
individuals 



REVENUE ACT OF 1921 

(b) Under such regulations as the Commission- 
er with the approval of the Secretary may prescribe 
a return made by one of two or more joint fiduci- 
aries and filed in the office of the collector of the 
district where such fiduciary resides shall be suf- 
ficient compliance with the above requirement. 
Such fiduciary shall make oath (i) that he has 
sufficient knowledge of the affairs of the individual, 
estate or trust for which the return is made, to en- 
able him to make the return, and (2) that the re- 
turn is, to the best of his knowledge and belief, true 
and correct. Any fiduciary required to make a re- 
turn under this Act shall be subject to all the pro- 
visions of this Act which apply to individuals. 



ReturnB for period 
of less than twelve 
months when 
accounting period 
changes 



Rate of tax 
for part of year 



Returns for a Period of Less than Twelve Months. 

Sec. 226. (a) That if a taxpayer, with the ap- 
proval of the Commissioner, changes the basis of 
computing net income from fiscal year to calendar 
year a separate return shall be made for the period 
between the close of the last fiscal year for which 
return was made and the following December 31. 
If the change is from calendar year to fiscal year, 
a separate return shall be made for the period be- 
tween the close of the last calendar year for which 
return was made and the date designated as the 
close of the fiscal year. If the change is from one 
fiscal year to another fiscal year a separate return 
shall be made for the period between the close of 
the former fiscal year and the date designated as 
the close of the new fiscal year. 

(b) In all cases where a separate return is made 
for a part of a taxable year the net income shall be 
computed on the basis of such period for which 
separate return is made, and the tax shall be paid 

58 



Sec. 227 
INCOME TAX— INDIVIDUALS 

thereon at the rate for the regular calendar year in 
which such period is included. 

(c) In the case of a return for a period of less Basuof 

. ^ ' ^ computation for 

than one year the net income shall be placed on an p^tof y«" 
annual basis by multiplying the amount thereof 
by twelve and dividing by the number of months 
included in such period; and the tax shall be such 
part of a tax computed on such annual basis as the 
number of months in such period is of twelve 
months. 

Time and Place for Filing Individual, Partner- 
ship and Fiduciary Returns. 



Sec. 227. (a) That returns (except in the case ^"fi'ii^g'',sJurn. 
of nonresident aliens) shall be made on or before 
the fifteenth day of the third month following the 
close of the fiscal year, or, if the return is made cuizen. or resident, 
on the basis of the calendar year, then the return 
shall be made on or before the 15th day of March. 
In the case of a nonresident alien individual re- rurnl"'''"* 
turns shall be made on or before the fifteenth day 
of the sixth month following the close of the fiscal 
year, or, if the return is made on the basis of the 
calendar year, then the return shall be made on 
or before the 15th day of June. The Commission- fo,'fi7fi°" °' "™ 
er may grant a reasonable extension of time for 
filing returns whenever in his judgment good cause 
exists and shall keep a record of every such ex- 
tension and the reason therefor. Except in the 
case of taxpayers who are abroad, no such exten- 
sion shall be for more than six months. 

(b) Returns shall be made to the collector for Hl'^^t'^'''' 
the district in which is located the legal residence 
or principal place of business of the person mak- 

59 



Sees. 228, 229 



Understatement in 
returns 



REVENUE ACT OF 1921 

ing the return, or, if he has no legal residence or 
principal place of business in the United States, 
then to the collector at Baltimore, Maryland. 

Understatement in Returns. 

Sec. 228. That if the collector or deputy col- 
lector has reason to believe that the amount of any 
income return is understated, he shall give due 
notice to the taxpayer making the return to show 
cause why the amount of the return should not be 
increased, and upon proof of the amount under- 
stated, may increase the same accordingly. Such 
taxpayer may furnish sworn testimony to prove any 
relevant facts and if dissatisfied with the decision 
of the collector may appeal to the Commissioner 
for his decision, under such rules of procedure as 
may be prescribed by the Commissioner with the 
approval of the Secretary. 



Incorporations 
within four 
months after 
passage of Act of 
previous business 
(See also Sec. 331) 



Incorporation of Individual or Partnership 
Business. 

Sec. 229. That in the case of the organization 
as a corporation within four months after the pass- 
age of this Act of any trade or business in which 
capital is a material income-producing factor, and 
which was previously owned by a partnership or 
individual, the net income of such trade or bus- 
iness from January i, 1 921, to the date of such or- 
ganization may at the option of the individual or 
partnership be taxed as the net income of a cor- 
poration is taxed under Titles II and III ; in which 
event the net income and invested capital of such 
trade or business shall be computed as if such cor- 
poration had been in existence on and after Jan- 
uary I, 1921, and the undistributed profits or earn- 

60 



Sees. 230, 231 

INCOME TAX— CORPORATIONS 

ings of such trade or business shall not be subject 
to the surtaxes imposed in section 211, but amounts 
distributed on and after January i, 1921, from the 
earnings or profits of such trade or business accumu- 
lated after December 31, 1920, shall be taxed to the 
recipients as dividends; and all the provisions of 
Titles II and III relating to corporations shall so 
far as practicable apply to such trade or business : 
Provided, That this section shall not apply to any 
trade or business, the net income of which for the 
taxable year 1921 was less than 20 per centum of 
its invested capital for such year : Provided further, 
That any taxpayer who takes advantage of this 
section shall pay the tax imposed by section 1000 
of the Revenue Act of 191 8 as if such taxpayer had 
been a corporation on and after January i, 1921. 

Part III. — Corporations, 

Tax on Corporations. 

Sec. 230. That, in lieu of the tax imposed by 
section 230 of the Revenue Act of 191 8, there shall 
be levied, collected, and paid for each taxable year 
upon the net income of every corporation a tax at 
the following rates: 

(a) For the calendar year 1921, 10 per centum f^^. ''"/«"" ax 
of the amount of the net income in excess of the 
credits provided in section 236; and 

(b) For each calendar year thereafter, 125^ per fhlreaftei'il^rf 
centum of such excess amount, income tax 

Conditional and Other Exemptions of 
Corporations. 

Sec. 231, That the following organizations shall S'|I^?zatio„. 
be exempt from taxation under this title — 

61 



Tax on 
corporations 



Sec. 231 



Labor, etc., 
organizations 



Mutual savings 
banks 



Fraternal orders* 
etc. 



Domestic 
building and 
loan associations 



Cemetery 
companies 



Charitable* 
educational and 
religious 
organizations, 
etc. 



Business 
leagues, etc. 



REVENUE ACT OF 1921 

( 1 ) Labor, agricultural, or horticultural organi- 
zations ; 

(2) Mutual savings banks not having a capital 
stock represented by shares; 

(3) Fraternal beneficiary societies, orders, or 
associations, (a) operating under the lodge system 
or for the exclusive benefit of the members of a 
fraternity itself operating under the lodge system ; 
and (b) providing for the payment of life, sick, 
accident, or other benefits to the members of such 
society, order, or association or their dependents; 

(4) Domestic building and loan associations 
substantially all the business of vi^hich is confined 
to making loans to members ; and cooperative banks 
w^ithout capital stock organized and operated for 
mutual purposes and w^ithout profit; 

(5) Cemetery companies owned and operated 
exclusively for the benefit of their members or 
which are not operated for profit; and any corpo- 
ration chartered solely for burial purposes as a 
cemetery corporation and not permitted by its char- 
ter to engage in any business not necessarily inci- 
dent to that purpose, no part of the net earnings 
of which inures to the benefit of any private stock- 
holder or individual; 

(6) Corporations, and any community chest, 
fund, or foundation, organized and operated ex- 
clusively for religious, charitable, scientific, liter- 
ary, or educational purposes, or for the prevention 
of cruelty to children or animals, no part of the 
net earnings of which inures to the benefit of any 
private stockholder or individual; 

(7) Business leagues, chambers of commerce, or 
boards of trade, not organized for profit and no 

62 



Sec. 231 

INCOME TAX— CORPORATIONS 

part of the net earnings of which inures to the 
benefit of any private stockholder or individual; 

(8) Civic leagues or organizations not organ- civic leagu.. 
ized for profit but operated exclusively for the 
promotion of social welfare; 

(9) Clubs organized and operated exclusively fJ^",^°t'/'J'„ 
for pleasure, recreation, and other non-profitable 
purposes, no part of the net earnings of which 
inures to the benefit of any private stockholder or 
member ; 

(10) Farmers' or other mutual hail, cyclone, or ^;?;"M„""^a„ce 
fire insurance companies, mutual ditch or irriga- =<""p»"''» 
tion companies, mutual or cooperative telephone 
companies, or like organizations of a purely local 
character, the income of which consists solely of 
assessments, dues, and fees collected from members 

for the sole purpose of meeting expenses ; 

(11) Farmers', fruit growers', or like associa- fr^iT^oJ^f- 
tions, organized and operated as sales agents for »"°<='^"°"» 
the purpose of marketing the products of mem- 
bers and turning back to them the proceeds of sales, 

less the necessary selling expenses, on the basis of 
the quantity of produce furnished by them ; or or- 
ganized and operated as purchasing agents for the 
purpose of purchasing supplies and equipment for 
the use of members and turning over such supplies 
and equipment to such members at actual cost, plus 
necessary expenses; 

(12) Corporations organized for the exclusive hoiTnTutuoniy 
purpose of holding title to property, collecting 

income therefrom, and turning over the entire 
amount thereof, less expenses, to an organization 
which itself is exempt from the tax imposed by 
this title; 

63 



Sees. 232, 233 



Federal land banks 
and national farm 
loan associations 



Personal service 
corporations 



REVENUE ACT OF 1921 

(13) Federal land banks and national farm loan 
associations as provided in section 26 of the Act 
approved July 17, 1916, entitled "An Act to pro- 
vide capital for agricultural development, to create 
standard forms of investment based upon farm 
mortgage, to equalize rates of interest upon farm 
loans, to furnish a market for United States bonds, 
to create Government depositaries and financial 
agents for the United States, and for other 
purposes"; 

(14) Personal service corporations. This sub- 
division shall not be in effect after December 31, 
1921. 



Corporation's net 
income defined 



Net Income of Corporations Defined. 

Sec. 232. That in the case of a corporation sub- 
ject to the tax imposed by section 230 the term 
"net income" means the gross income as defined in 
section 233 less the deductions allowed by section 
234, and the net income shall be computed on the 
same basis as is provided in subdivision (b) of sec- 
tion 212 or in section 226. In the case of a foreign 
corporation or of a corporation entitled to the bene- 
fits of section 262 the computation shall also be 
made in the manner provided in section 217. 



Corporation's 

gross income defined 



Gross Income of Corporations Defined. 

Sec. 233. (a) That in the case of a corporation 
subject to the tax imposed by section 230 the term 
"gross income" means the gross income as defined 
in sections 213 and 217, except that mutual marine 
insurance companies shall include in gross income 
the gross premiums collected and received by them 
less amounts paid for reinsurance. 

64 



Sec. 234 



INCOME TAX— CORPORATIONS 



(b) In the case of a foreign corporation, gross co'pOTaiion 

* t • /• fibrosa income 

income means only gross income from sources 
within the United States, determined (except in 
the case of insurance companies subject to the tax 
imposed by section 243 or 246) in the manner pro- 
vided in section 217. 

Deductions Allowed Corporations. 

Sec. 234. (a) That in computing the net income f:/p"oraHon:"°"* 
of a corporation subject to the tax imposed by sec- 
tion 230 there shall be allowed as deductions: 

(i) All the ordinary and necessary expenses Burfn... «p«n.. 
paid or incurred during the taxable year in carry- 
ing on any trade or business, including a reasonable 
allowance for salaries or other compensation for 
personal services actually rendered, and including 
rentals or other payments required to be made as a 
condition to the continued use or possession of 
property to which the corporation has not taken 
or is not taking title, or in which it has no equity; 

(2) All interest paid or accrued within the tax- '"dtbtedne.. 
able year on its indebtedness, except on indebted- 
ness incurred or continued to purchase or carry 
obligations or securities (other than obligations of 

the United States issued after September 24, 191 7, 
and originally subscribed for by the taxpayer) the 
interest upon which is wholly exempt from taxation 
under this title; 

(3) Taxes paid or accrued within the taxable ^"".5" 
year except (a) income, war-profits, and excess- 
profits taxes imposed by the authority of the United 
States, (b) so much of the income, war-profits and 
excess-profits taxes imposed by the authority of any 
foreign country or possession of the United States 

65 



Taxes paid or 



Sec. 234 



LoBseB 



Limitations of 
loaa on sale 
of securities 



REVENUE ACT OF 1921 

as is allowed as a credit under section 238, and (c) 
taxes assessed against local benefits of a kind tending 
to increase the value of the property assessed. In 
the case of obligors specified in subdivision (b) 
of section 221 no deduction for the payment of the 
tax imposed by this title, or any other tax paid 
pursuant to the contract or provision referred to in 
that subdivision, shall be allowed nor shall such 
tax be included in the gross income of the obligee. 
The deduction allowed by this paragraph shall be 
allowed in the case of taxes imposed upon a share- 
holder or member of a corporation upon his interest 
as shareholder or member, which are paid by the 
corporation without reimbursement from the share- 
holder or member, but in such cases no deduction 
shall be allowed the shareholder or member for the 
amount of such taxes. For the purpose of this para- 
graph, estate, inheritance, legacy, and succession 
taxes accrue on the due date thereof except as other- 
wise provided by the law of the jurisdiction impos- 
ing such taxes ; 

(4) Losses sustained during the taxable year and 
not compensated for by insurance or otherwise; un- 
less, in order to clearly reflect the income, the loss 
should in the opinion of the Commissioner be ac- 
counted for as of a different period. No deduction 
shall be allowed for any loss claimed to have been 
sustained in any sale or other disposition of shares 
of stock or securities made after the passage of this 
Act where it appears that within 30 days before or 
after the date of such sale or other disposition the 
taxpayer has acquired (otherwise than by bequest 
or inheritance) substantially identical property, 
and the property so acquired is held by the tax- 
payer for any period after such sale or other dispo- 

66 



Sec. 234 
INCOME TAX— CORPORATIONS 

sition, unless such claim is made by a dealer in 
stock or securities and with respect to a transaction 
made in the ordinary course of its business. If 
such acquisition is to the extent of part only of 
substantial identical property, then only a propor- 
tionate part of the loss shall be disallowed. In case 
of losses arising from destruction of or damage to 
property, where the property so destroyed or dam- 
aged was acquired before March i, 19 13, the de- 
duction shall be computed upon the basis of its fair 
market price or value as of March i, 1913; 

(5) Debts ascertained to be worthless and Debts charged os 
charged off within the taxable year (or in the b^n^b/f 
discretion of the Commissioner, a reasonable addi- 
tion to a reserve for bad debts) ; and when satisfied 

that a debt is recoverable only in part, the Com- 
missioner may allow such debt to be charged off 
in part; 

(6) The amount received as dividends (A) from °™'J»"">= 
a domestic corporation other than a corporation 
entitled to the benefits of section 262, or (B) from 

any foreign corporation when it is shown to the 
satisfaction of the Commissioner that more than 
50 per centum of the gross income of such foreign 
corporation for the three-year period ending with 
the close of its taxable year preceding the declara- 
tion of such dividends (or for such part of such 
period as the foreign corporation has been in exist- 
ence) was derived from sources within the United 
States as determined under section 217; 

(7) A reasonable allowance for the exhaustion, Depreciation and 

\ / / / obsolescence 

wear and tear of property used in the trade or busi- 
ness, including a reasonable allowance for obsoles- 
cence. In the case of such property acquired before 

67 



Sec. 234 



Amortization of war 
plant or 
equipment 



Depletion of 
natural resources 



REVENUE ACT OF 1921 

March i, 19 13, this deduction shall be computed 
upon the basis of its fair market price or value as 
of March i, 1913; 

(8) In the case of buildings, machinery, equip- 
ment, or other facilities, constructed, erected, in- 
stalled, or acquired, on or after April 6, 1917, for 
the production of articles contributing to the prose- 
cution of the war against the German Government, 
and in the case of vessels constructed or acquired on 
or after such date for the transportation of articles 
or men contributing to the prosecution of such war, 
there shall be allowed, for any taxable year ending 
before March 3, 1924 (if claim therefor was made 
at the time of filing return for the taxable year 
1918, 1919, 1920, or 1921) a reasonable deduction 
for the amortization of such part of the cost of 
such facilities or vessels as has been borne by the 
taxpayer, but not again including any amount other- 
wise allowed under this title or previous Acts of 
Congress as a deduction in computing net income. 
At any time before March 3, 1924, the Commis- 
sioner may, and at the request of the taxpayer shall, 
re-examine the return, and if he then finds as a 
result of an appraisal or from other evidence that 
the deduction originally allowed was incorrect, the 
income, war-profits, and excess-profits taxes for the 
year or years affected shall be redetermined and the 
amount of the tax due upon such redetermination, 
if any, shall be paid upon notice and demand by the 
collector, or the amount of tax overpaid, if any, 
shall be credited or refunded to the' taxpayer in 
accordance with the provisions of section 252; 

(9) In the case of mines, oil and gas wells, 
other natural deposits, and timber, a reasonable 
allowance for depletion and for depreciation of 

68 



Sec. 234 



INCOME TAX— CORPORATIONS 

improvements, according to the peculiar conditions 
in each case, based upon cost including cost of de- 
velopment not otherwise deducted : Provided, That 
in the case of such properties acquired prior to 
March i, 1913, the fair market value of the prop- 
erty (or the taxpayer's interest therein) on that 
date shall be taken in lieu of cost up to that date : 
Provided further, That in the case of mines, oil and 
gas wells, discovered by the taxpayer, on or after 
March i, 191 3, and not acquired as the result of 
purchase of a proven tract or lease, where the fair 
market value of the property is materially dispro- 
portionate to the cost, the depletion allowance shall 
be based upon the fair market value of the property 
at the date of the discovery, or within thirty days 
thereafter: And provided further. That such de- 
pletion allowance based on discovery value shall 
not exceed the net income, computed without allow- 
ance for depletion, from the property upon which 
the discovery is made, except where such net in- 
come so computed is less than the depletion allow- 
ance based on cost or fair market value as of March 
I, 191 3 ; such reasonable allowance in all the above 
cases to be made under rules and regulations to be 
prescribed by the Commissioner with the approval 
of the Secretary. In the case of leases the deduc- 
tions allowed by this paragraph shall be equitably 
apportioned between the lessor and lessee; 



Additional 



(10) In the case of insurance companies (other deduction. for 

\ ' ■'^ > insurance 

than life insurance companies), in addition to the th^^uyi" "*•"■ 
above (unless otherwise allowed) : (A) The net 
addition required by law to be made within the 
taxable year to reserve funds (including in the case 
of assessment insurance companies the actual de- 
posit of sums with State or Territorial officers pur- 

69 



Sec. 234 



Additional 
deductions for 
companies issuing 
life, health and 
accident policies 
combined 



Additional 
deductions for 
mutual marine 
insurance 
companies 



Deductions for 
mutual insurance 
companies other 
than life or 
marine 



REVENUE ACT OF 1921 

suant to law as additions to guaranty or reserve 
funds) ; and (B) the sums other than dividends 
paid w^ithin the taxable year on policy and annuity 
contracts. After December 31, 1921, this subdi- 
vision shall apply only to mutual insurance com- 
panies other than life insurance companies; 

(ri) In the case of corporations (except those 
taxed under section 243) issuing policies covering 
life, health, and accident insurance combined in 
one policy issued on the weekly premium payment 
plan continuing for life and not subject to cancel- 
lation, in addition to the above, such portion of the 
net addition (not required by law) made within 
the taxable year to reserve funds as the Commis- 
sioner finds to be required for the protection of the 
holders of such policies only. This subdivision 
shall not be in effect after December 31, 1921 ; 

(12) In the case of mutual marine insurance 
companies, there shall be allowed, in addition to 
the deductions allowed in paragraphs ( i ) to ( 10) , 
inclusive, and paragraph (14), unless otherwise 
allowed, amounts repaid to policyholders on ac- 
count of premiums previously paid by them, and 
interest paid upon such amounts between the ascer- 
tainment and the payment thereof ; 

(13) In the case of mutual insurance companies 
(including interinsurers and reciprocal under- 
writers, but not including mutual life or mutual 
marine insurance companies) requiring their mem- 
bers to make premium deposits to provide for losses 
and expenses, there shall be allowed, in addition 
to the deductions allowed in paragraphs (i) to 
(10), inclusive, and paragraph (14), unless other- 
wise allowed, the amount of premium deposits re- 

70 



Sec. 234 



INCOME TAX— CORPORATIONS 



turned to their policyholders and the amount of 
premium deposits retained for the payment of 
losses, expenses, and reinsurance reserves; 

(14) If property is compulsorily or involun- PvowTry"*"'" 
tarily converted into cash or its equivalent as a re- pir«""°" ^^" 
suit of (A) its destruction in whole or in part, (B) 
theft or seizure, or (C) an exercise of the power 
of requisition or condemnation, or the threat or 
imminence thereof; and if the taxpayer proceeds 
forthwith in good faith, under regulations pre- 
scribed by the Commissioner with the approval of 
the Secretary, to expend the proceeds of such con- 
version in the acquisition of other property of a 
character similar or related in service or use to the 
property so converted, or in the acquisition of 80 per 
centum or more of the stock or shares of a corpora- 
tion owning such other property, or in the estab- 
lishment of a replacement fund, then there shall be 
allowed as a deduction such portion of the gain 
derived as the portion of the proceeds so expended 
bears to the entire proceeds. The provisions of 
this paragraph prescribing the conditions under 
which a deduction may be taken in respect of the 
proceeds or gains derived from the compulsory or 
involuntary conversion of property into cash or its 
equivalent, shall apply so far as may be practicable 
to the exemption or exclusion of such proceeds or 
gains from gross income under prior income, war- 
profits and excess-profits tax Acts. 

(b) In the case of a foreign corporation or of a eorporanon 
corporation entitled to the benefits of section 262 <*<«>»•=«'>'» 
the deductions allowed in subdivision (a) shall be 
allowed only if and to the extent that they are con- 
nected with income from sources within the United 
States; and the proper apportionment and alloca- 

71 



Sees. 235, 236 



REVENUE ACT OF 1921 

tion of the deductions with respect to sources within 
and without the United States shall be determined 
as provided in section 217 under rules and regula- 
tions prescribed by the Comniissioner with the ap- 
proval of the Secretary. 



Items not 
deductible by 
corporations 



Items Not Deductible by Corporations. 

Sec. 235. That in computing net income no de- 
duction shall in any case be allowed in respect of 
any of the items specified in section 215. 



Credits allowed 
corporations 



Interest 



Exemption or 
specific credit 



Credit for 
excess profits 
taxes 



Credit for 
fiscal year 
returns ending: 
in 1921 



Credits Allowed Corporations. 

Sec. 236. That for the purpose only of the tax 
imposed by section 230 there shall be allowed the 
following credits : 

(a) The amount received as interest upon obli- 
gations of the United States and bonds issued by 
the War Finance Corporation, which is included 
in gross income under section 233 ; 

(b) In the case of a domestic corporation the 
net income of which is $25,000 or less, a specific 
credit of $2,000; but if the net income is more than 
$25,000 the tax imposed by section 230 shall not 
exceed the tax which would be payable if the $2,000 
credit were allowed, plus the amount of the net 
income in excess of $25,000; and 

(c) The amount of any war-profits and excess- 
profits taxes imposed by Act of Congress for the 
same taxable year. The credit allowed by this sub- 
division shall be determined as follows : 

(i) In the case of a corporation which makes 
return for a fiscal year beginning in 1920 and end- 
ing in 1 921, in computing the income tax as pro- 

72 



Sec. 237 



INCOME TAX— CORPORATIONS 



vided in subdivision (a) of section 205, the portion 
of the war-profits and excess-profits tax computed 
for the entire period under clause (i) of subdi- 
vision (a) of section 335 shall be credited against 
the net income computed for the entire period as 
provided in clause (i) of subdivision (a) of sec- 
tion 205, and the portion of the war-profits and 
excess-profits tax computed for the entire period 
under clause (2) of subdivision (a) of section 335 
shall be credited against the net income computed 
for the entire period as provided in clause (2) of 
subdivision (a) of section 205. 

(2) In the case of a corporation which makes credit. fiBcai 

^ ' * year ending 

return for a fiscal year beginning in 1921 and end- *""" 
ing in 1922, in computing the income tax as pro- 
vided in subdivision (b) of section 205, the war- 
profits and excess-profits tax computed under sub- 
division (b) of section 335 shall be credited against 
the net income computed for the entire period as 
provided in clause (i) of subdivision (b) of sec- 
tion 205. 

Payment of Corporation Income Tax at Source. 
Sec. 2-27. That in the case of foreign corporations withholding of t«x 

^ , _ , C3 1^ from income of 

subject to taxation under this title not engaged in '"^p^ition. 
trade or business within the United States and not 
having any office or place of business therein, there 
shall be deducted and withheld at the source in the 
same manner and upon the same items of income as 
is provided in section 221 a tax equal to 12^ per 
centum thereof (but during the calendar year 1921 
only 10 per centum) , and such tax shall be returned 
and paid in the same manner and subject to the 
same conditions as provided in that section: Pro- 
vided^ That in the case of interest described in sub- 

73 



Sec. 238 



Credits for taxes 
paid by 
corporations 



Adjustments for 
under or over 
pajrments of 
taxes 



REVENUE ACT OF 1921 

division (b) of that section the deduction and with- 
holding shall be at the rate of 2 per centum. 

Credit for Taxes in Case of Corporations. 

Sec. 238. (a) That in the case of a domestic 
corporation the tax imposed by this title, plus the 
war-profits and excess-profits taxes, if any, shall be 
credited with the amount of any income, war- 
profits, and excess-profits taxes paid during the 
same taxable year to any foreign country, or to any 
possession of the United States: Provided, That 
the amount of credit taken under this subdivision 
shall in no case exceed the same proportion of the 
taxes, against which such credit is taken, which the 
taxpayer's net income (computed without deduc- 
tion for any income, war-profits, and excess-profits 
taxes imposed by any foreign country or posses- 
sion of the United States) from sources without the 
United States bears to its entire net income (com- 
puted without such deduction) for the same taxable 
year. In the case of domestic insurance companies 
subject to the tax imposed by section 243 or 246, 
the term "net income" as used in this subdivision 
means net income as defined in sections 245 and 
246, respectively. 

(b) If accrued taxes when paid diflfer from the 
amounts claimed as credits by the corporation, or 
if any tax paid is refunded in whole or in part, 
the corporation shall at once notify the Commis- 
sioner, who shall redetermine the amount of the 
income, war-profits and excess-profits taxes for the 
year or years affected, and the amount of taxes due 
upon such redetermination, if any, shall be paid 
by the corporation upon notice and demand by the 
collector, or the amount of taxes overpaid, if any, 

74 



Sec. 238 
INCOME TAX— CORPORATIONS 

shall be credited or refunded to the corporation 
in accordance with the provisions of section 252. 
In the case of such a tax accrued but not paid, the 
Commissioner as a condition precedent to the al- 
lowance of this credit may require the corporation 
to give a bond with sureties satisfactory to and to be 
approved by him in such penal sum as he may 
require, conditioned for the payment by the tax- 
payer of any amount of taxes found due upon any 
such redetermination; and the bond herein pre- 
scribed shall contain such further conditions as 
the Commissioner may require. 

(c) These credits shall be allowed only if the fo"^btTin credit"" 
taxpayer furnishes evidence satisfactory to the 
Commissioner showing the amount of income de- 
rived from sources without the United States, and 

all other information necessary for the verification 
and computation of such credit. 

(d) If a domestic corporation makes a return f^afng^T mi"' "'" 
for a fiscal year beginning in 1920 and ending in 

1921, the credit for the entire fiscal year shall, 
notwithstanding any provision of this Act, be de- 
termined under the provisions of this section; and 
the Commissioner is authorized to disallow, in 
whole or in part, any such credit which he finds 
has already been taken by the taxpayer. 

(e) For the purposes of this section a domestic credu for domestic 

\ / r r corporations owning 

corporation which owns a majority of the voting "f 7o«°gn'' °' "'"'' 
stock of a foreign corporation from which it re- "=°"-p°'-=«°"' 
ceives dividends (not deductible under section 234) 
in any taxable year shall be deemed to have paid 
the same proportion of any income, war-profits, 
or excess-profits taxes paid by such foreign corpo- 
ration to any foreign country or to any possession 

75 



Sec. 238 



Limitation of 
credit 



"Accumulated 
profits" defined 



REVENUE ACT OF 1921 

of the United States, upon or with respect to the 
accumulated profits of such foreign corporation 
from which such dividends were paid, which the 
amount of such dividends bears to the amount of 
such accumulated profits: Provided^ That the 
credit allowed to any domestic corporation under 
this subdivision shall in no case exceed the same 
proportion of the taxes against which it is credited, 
which the amount of such dividends bears to the 
amount of the entire net income of the domestic 
corporation in which such dividends are included. 
The term "accumulated profits" when used in this 
subdivision in reference to a foreign corporation, 
means the amount of its gains, profits, or income 
in excess of the income, war-profits, and excess- 
profits taxes imposed upon or with respect to such 
profits or income; and the Commissioner with the 
approval of the Secretary shall have full power 
to determine from the accumulated profits of what 
year or years such dividends were paid; treating 
dividends paid in the first sixty days of any year 
as having been paid from the accumulated profits 
of the preceding year or years (unless to his satis- 
faction shown otherwise), and in other respects 
treating dividends as having been paid from the 
most recently accumulated gains, profits, or earn- 
ings. In the case of a foreign corporation, the in- 
come, war-profits, and excess-profits taxes of which 
are determined on the basis of an accounting period 
of less than one year, the word "year" as used in 
this subdivision shall be construed to mean such 
accounting period. 



Credits for certain 
corporations in U. S. 
possessions 



(f) For the purposes of this section a corpora- 
tion entitled to the benefits of section 262 shall be 
treated as a foreign corporation. 

76 



Sec. 239 



INCOME TAX— CORPORATIONS 
Corporation Returns, 



Execution of 

corporation 

returns 



Sec. 239. (a) That every corporation subject to 
taxation under this title and every personal service 
corporation shall make a return, stating specifically 
the items of its gross income and the deductions and 
credits allowed by this title. The return shall be 
sworn to by the president, vice-president, or other 
principal officer and by the treasurer or assistant 
treasurer. If any foreign corporation has no office ?o'r'^<!ratio°n/by*'^" 
or place of business in the United States but has «s«"'*"U-s. 
an agent in the United States, the return shall be 
made by the agent. In cases where receivers, trus- i^"an£upu:y'and 
tees in bankruptcy, or assignees are operating the ""«"*" 
property or business of corporations, such receiv- 
ers, trustees, or assignees shall make returns for 
such corporations in the same manner and form 
as corporations are required to make returns. Any 
tax due on the basis of such returns made by re- 
ceivers, trustees, or assignees shall be collected in 
the same manner as if collected from the corpora- 
tions of whose business or property they have 
custody and control. 

(b) Returns made under this section shall be uTanTz^mon't'hs and 
subject to the provisions of sections 226 and 228. ""■»""=»«■»«"'« 
When return is made under section 226 the credit 

provided in subdivision (b) of section 236 shall 
be reduced to an amount which bears the same ratio 
to the full credit therein provided as the number 
of months in the period for which such return is 
made bears to twelve months. 

(c) There shall be included in the return or ffd'^^ends'"'"'"'* 
appended thereto a statement of such facts as will ''««=•"«<» 
enable the Commissioner to determine the portion 

of the earnings or profits of the corporation (in- 

77 



Sec. 240 



Consolidated 
returns for 
affiliated 
corporations 



Apportionnnent of 
tax to affiliated 
corporations 



Corporations 
deemed to be 
affiliated 



REVENUE ACT OF 1921 

eluding gains, profits and income not taxed) ac- 
cumulated during the taxable year for which the 
return is made, which have been distributed or 
ordered to be distributed, respectively, to its stock- 
holders or members during each year. 

Consolidated Returns of Corporations. 

Sec. 240. (a) That corporations which are affil- 
iated within the meaning of this section may, for 
any taxable year beginning on or after January i, 
1922, make separate returns or, under regulations 
prescribed by the Commissioner with the approval 
of the Secretary, make a consolidated return of net 
income for the purpose of this title, in which case 
the taxes thereunder shall be computed and de- 
termined upon the basis of such return. If return 
is made on either of such basis, all returns there- 
after made shall be upon the same basis unless 
permission to change the basis is granted by the 
Commissioner. 

(b) In any case in which a tax is assessed upon 
the basis of a consolidated return, the total tax shall 
be computed in the first instance as a unit and shall 
then be assessed upon the respective affiliated corpo- 
rations in such proportions as may be agreed upon 
among them, or, in the absence of any such agree- 
ment, then on the basis of the net income properly 
assignable to each. There shall be allowed in com- 
puting the income tax only one specific credit com- 
puted as provided in subdivision (b) of section 236. 

(c) For the purpose of this section two or more 
domestic corporations shall be deemed to be affil- 
iated (i) if one corporation owns directly or con- 
trols through closely affiliated interests or by a 
nominee or nominees substantially all the stock of 

78 



Sec. 241 

INCOME TAX— CORPORATIONS 

the other or others, or (2) if substantially all the 
stock of two or more corporations is owned or con- 
trolled by the same interests. 

(d) For the purposes of this section a corpora- consolidation of 

,-* ^ certain corporation 

tion entitled to the benefits of section 262 shall be rnc^porltodta'' 
treated as a foreign corporation: Provided, That "s- or not 
in any case of two or more related trades or busi- 
nesses (whether unincorporated or incorporated 
and whether organized in the United States or not) 
owned or controlled directly or indirectly by the 
same interests, the Commissioner may consolidate 
the accounts of such related trades and businesses, in 
any proper case, for the purpose of making an 
accurate distribution or apportionment of gains, 
profits, income, deductions, or capital between or 
among such related trades or businesses. 

(e) Corporations which are affiliated within the f°t^^'^hr%^r^ 
meaning of this section shall make consolidated p"<" '<> •»«"• i- "" 
returns for any taxable year beginning prior to 

January i, 1922, in the same manner and subject 
to the same conditions as provided by the Revenue 
Act of 1918. 

Time and Place for Filing Corporate Returns. 

Sec. 241. (a) That returns of corporations shall J™:raH'i.n7eturn» 
be made at the same time as is provided in subdi- 
vision (a) of section 227, except that in the case 
of foreign corporations not having any office or 
place of business in the United States returns shall 
be made at the same time as provided in section 227 
in the case of a nonresident alien individual. 



corporation returns 



(b) Returns shall be made to the collector of rirporTtfi 
the district in which is located the principal place 
of business or principal office or agency of the 



79 



Sees. 242,-244 



REVENUE ACT OF 1921 



corporation, or, if it has no principal place of busi- 
ness or principal office or agency in the United 
States, then to the collector at Baltimore, Maryland. 



Taxation of life 

insurance 

companieB 



Domestic life 

insurance 

companies 



Foreign life 

Insurance 

companies 



"Gross income" 
defined 



"Reserve funds 
required by law*' 



, Taxes on Insurance Companies. 

Sec. 242. That when used in this title the term 
"life insurance company" means an insurance com- 
pany engaged in the business of issuing life insur- 
ance and annuity contracts (including contracts of 
combined life, health, and accident insurance), the 
reserve funds of which held for the fulfillment of 
such contracts comprise more than 50 per centum 
of its total reserve funds. 

Sec. 243. That in lieu of the taxes imposed by 
sections 230 and 1000 and by Title III, there shall 
be levied, collected, and paid for the calendar year 
1 92 1 and for each taxable year thereafter upon the 
net income of every life insurance company a tax 
as follows: 

( 1 ) In the case of a domestic life insurance com- 
pany, the same percentage of its net income as is 
imposed upon other corporations by section 230; 

(2) In the case of a foreign life insurance com- 
pany, the same percentage of its net income from 
sources within the United States as is imposed upon 
the net income of other corporations by section 230. 

Sec. 244. (a) That in the case of a life insurance 
company the term "gross income" means the gross 
amount of income received during the taxable year 
from interest, dividends, and rents. 

(b) The term "reserve funds required by law" 
includes, in the case of assessment insurance, sums 
actually deposited by any company or association 

80 



Sec. 245 



INCOME TAX— INSURANCE COMPANIES 

with State or Territorial officers pursuant to law 
as guaranty or reserve funds, and any funds main- 
tained under the charter or articles of incorpora- 
tion of the company or association exclusively for 
the payment of claims arising under certificates of 
membership or policies issued upon the assessment 
plan and not subject to any other use. 

Sec. 245. (a) That in the case of a life insurance nJ^'^n^ 
company the term "net income" means the gross 
income less — 



income 
insurance 
companies 



of 



Deductions from 
year's income 



( 1 ) The amount of interest received during the 
taxable year which under paragraph (4) of sub- 
division (b) of section 213 is exempt from taxation 
under this title; 

(2) An amount equal to the excess, if any, over mean'reLtfeol 
the deduction specified in paragraph (i) of this <*)"''°" 
subdivision, of 4 per centum of the mean of the 

reserve funds required by law and held at the be- 
ginning and end of the taxable year, plus (in case 
of life insurance companies issuing policies cover- 
ing life, health, and accident insurance combined 
in one policy issued on the weekly premium pay- 
ment plan, continuing for life and not subject to 
cancellation) 4 per centum of the mean of such 
reserve funds (not required by law) held at the 
beginning and end of the taxable year, as the Com- 
missioner finds to be necessary for the protection 
of the holders of such policies only; 

(3) The amount received as dividends (A) from J|i\?^t1^f^ 
a domestic corporation other than a corporation 
entitled to the benefits of section 262, or (B) from 

any foreign corporation when it is shown to the 
satisfaction of the Commissioner that more than 
50 per centum of the gross income of such foreign 

81 



Sec. 245 



2 % of reserve for 

dividends 

not deferred 



Investment 
expense and limit 



Taxes on 
real estate 



REVENUE ACT OF 1921 

corporation for the three-year period ending with 
the close of its taxable year preceding the declara- 
tion of such dividends (or for such part of such 
period as the foreign corporation has been in 
existence) was derived from sources within the 
United States as determined under section 217; 

(4) An amount equal to 2 per centum of any 
sums held at the end of the taxable year as a reserve 
for dividends (other than dividends payable dur- 
ing the year following the taxable year) the pay- 
ment of which is deferred for a period of not less 
than five years from the date of the policy contract; 

(5) Investment expenses paid during the tax- 
able year : Provided, That if any general expenses 
are in part assigned to or included in the invest- 
ment expenses, the total deduction under this para- 
graph shall not exceed one-fourth of i per centum 
of the book value of the mean of the invested assets 
held at the beginning and end of the taxable year ; 

(6) Taxes and other expenses paid during the 
taxable year exclusively upon or with respect to 
the real estate owned by the company, not including 
taxes assessed against local benefits of a kind tend- 
ing to increase the value of the property assessed, 
and not including any amount paid out for new 
buildings, or for permanent improvements or bet- 
terments made to increase the value of any prop- 
erty. The deduction allowed by this paragraph 
shall be allowed in the case of taxes imposed upon 
a shareholder or member of a company upon his 
interest as shareholder or member, which are paid 
by the company without reimbursement from the 
shareholder or member, but in such cases no de- 
duction shall be allowed the shareholder or mem- 
ber for the amount of such taxes ; 



82 



Sec. 245 
INCOME TAX— INSURANCE COMPANIES 

(7) A reasonable allowance for the exhaustion, Depreciation and 

J . « « t 1 « obsolescence 

wear and tear of property, including a reasonable 
allowance for obsolescence. In the case of prop- 
erty acquired before March i, 191 3, this deduction 
shall be computed upon the basis of its fair market 
price or value as of March i, 1913 ; 

(8) All interest paid or accrued within the tax- interest deductible 
able year on its indebtedness, except on indebted- 
ness incurred or continued to purchase or carry 
obligations or securities (other than obligations of 

the United States issued after September 24, 1917, 
and originally subscribed for by the taxpayer) the 
interest upon which is wholly exempt from taxa- 
tion under this title ; 

(9) In the case of a domestic life insurance com- credit or 

^ ' ' ^ exemption for 

pany, the net income of which (computed without in°'^"ncVconipany 

the benefit of this paragraph) is $25,000 or less, 

the sum of $2,000; but if the net income is more 

than $25,000 the tax imposed by section 243 shall 

not exceed the tax which would be payable if the 

$2,000 credit were allowed, plus the amount of 

the net income in excess of $25,000. 

(b) No deduction shall be made under para- diXjction" "' 
graphs (6) and (7) of subdivision (a) on account 
of any real estate owned and occupied in whole or 
in part by a life insurance company unless there 
is included in the return of gross income the rental 
value of the space so occupied. Such rental value 
shall be not less than a sum which in addition to 
any rents received from other tenants shall pro- 
vide a net income (after deducting taxes, deprecia- 
tion, and all other expenses) at the rate of 4 per 
centum per annum of the book value at the end 
of the taxable year of the real estate so owned or 
occupied. 

83 



Sec. 246 



Forelffn Ufa 
insurance company 
**net income** 



Taxation of 
insurance 
companies 
other than life 
and mutual 
companies 



Domestic 
companies 



Foreign 
companies 



"Gross inconne*' 



REVENUE ACT OF 1921 

(c) In the case of a foreign life insurance com- 
pany the amount of its net income for any taxable 
year from sources within the United States shall 
be the same proportion of its net income for the 
taxable year from sources within and without the 
United States, which the reserve funds required by 
law and held by it at the end of the taxable year 
upon business transacted within the United States 
is of the reserve funds held by it at the end of the 
taxable year upon all business transacted. 

Sec. 246. (a) That, in lieu of the taxes imposed 
by sections 230 and 1000, there shall be levied, col- 
lected and paid for the calendar year 1922, and 
for each taxable year thereafter, upon the net in- 
come of every insurance company (other than a 
life or mutual insurance company) a tax as follows : 

(i) In the case of such a domestic insurance 
company the same percentage of its net income as 
is imposed upon other corporations by section 230; 

(2) In the case of such a foreign insurance com- 
pany the same percentage of its net income from 
sources within the United States as is imposed upon" 
the net income of other corporations by section 230. 

(b) In the case of an insurance company sub- 
ject to the tax imposed by this section— 

(i) The term "gross income" means the com- 
bined gross amount, earned during the taxable 
year, from investment income and from under- 
writing income as provided in this subdivision, 
computed on the basis of the underwriting and 
investment exhibit of the annual statement ap- 
proved by the National Convention of Insurance 
Commissioners ; 

84 



Sec. 246 
INCOME TAX— INSURANCE COMPANIES 

(2) The term "net income" means the gross in- "N"-"™" 
come as defined in paragraph (i) of this subdi- 
vision less the deductions allowed by section 247; 

/ \ n-n If • n 1 "Investment 

(3) The term ' mvestment income means the income" 
gross amount of income earned during the taxable 

year from interest, dividends and rents, computed 
as follows : 

To all interest, dividends and rents received dur- 
ing the taxable year, add interest, dividends and 
rents due and accrued at the end of the taxable 
year, and deduct all interest, dividends and rents 
due and accrued at the end of the preceding tax- 
able year ; 

(4) The term "underwriting income" means the ;'„",^i^:r'""« 
premiums earned on insurance contracts during the 

taxable year less losses incurred and expenses in- 
curred ; 

(c) The term "premiums earned on insur- "Premium. earned 

\ ~^ f ■*■ on insurance 

ance contracts during the taxable year means an contracts- 
amount computed as follows : 

From' the amount of gross premiums written on 
insurance contracts during the taxable year, deduct 
return premiums and premiums paid for reinsur- 
ance. To the result so obtained add unearned 
premiums on outstanding business at the end of the 
preceding taxable year and deduct unearned prem- 
iums on outstanding business at the end of the tax- 
able year; 

(6) The term "losses incurred" means losses in- "Losses incurred- 
curred during the taxable year on insurance con- 
tracts, computed as follows: 

To losses paid during the taxable year add sal- 
vage and reinsurance recoverable outstanding at 

85 



Sec. 247 



"Ejcpenses 
incurred*' 



Deductions 
allowed insurance 
companies 



Expenses 



Interest paid 



Taxes 



L.c>8sep 



REVENUE ACT OF 1921 

the end of the preceding taxable year, and deduct 
salvage and reinsurance recoverable outstanding 
at the end of the taxable year. To the results so 
obtained add all unpaid losses outstanding at the 
end of the taxable year and deduct unpaid losses 
outstanding at the end of the preceding taxable 
year; 

(7) The term "expenses incurred" means all ex- 
penses shown on the annual statement approved by 
the National Convention of Insurance Commis- 
sioners, and shall be computed as follows : 

To all expenses paid during the taxable year add 
expenses unpaid at the end of the taxable year and 
deduct expenses unpaid at the end of the preceding 
taxable year. For the purpose of computing the 
net income subject to the tax imposed by this sec- 
tion there shall be deducted from expenses incurred 
as defined in this paragraph all expenses incurred 
which are not allowed as deductions by section 247. 

Sec. 247. (a) That in computing the net income 
of an insurance company subject to the tax im- 
posed by section 246 there shall be allowed as 
deductions : 

(i) All ordinary and necessary expenses in- 
curred, as provided in paragraph (i) of subdi- 
vision (a) of section 234; 

(2) All interest as provided in paragraph (2) 
of subdivision (a) of section 234; 

(3) Taxes as provided in paragraph (3) of sub- 
division (a) of section 234. 

(4) Losseg incurred; 

86 



Sec, 247 
INCOME TAX— INSURANCE COMPANIES 

(5) Bad debts in the nature of agency balances »"«•<»•»"• 
and bills receivable-ascertained to be worthless and 
charged off within the taxable year ; 

(6) The amount received as dividends from °^^lf;^' 
corporations as provided in paragraph (6) of sub- 
division (a) of section 234; 

(7) The amount of interest earned during the interest eamed 
taxable year which under paragraph (4) of sub- 
division (b) of section 213 is exempt from taxation 

under this title, and the amount of interest allowed 
as a credit under subdivision (a) of section 236; 

(8) A reasonable allowance, for the exhaustion, dop^^^""" 
wear and tear of property, as provided in para- 
graph (7) of subdivision (a) of section 234; 

(9) In the case of such a domestic insurance f"^J'^°Mc 
company, the net income of which (computed 
without the benefit of this paragraph) is $25,000 
or less, the sum of $2,000; but if the net income is 
more than $25,000 the tax imposed by section 246 
shall not exceed the tax which would be payable 
if the $2,000 credit were allowed, plus the amount 

of the net income in excess of $25,000. 

(b) In the case of a foreign corporation the de- Deductions allowed 
ductions allowed in this section shall be allowed corporation. 

to the extent provided in subdivision (b) of sec- 
tion 234. 

(c) Nothing in this section or in section 246 no item twice 

1 ,11 J -1 • Z deductible 

shall be construed to permit the same item to be 
twice deducted. 



insurance company 



87 



Sec. 250 



Payment of taxes 
in installments 



Extension of time 
for filing and 
payment 



Tax may be paid 
in single 
payment 



REVENUE ACT OF 1921 

Part IV.— Administrative Provisions. 

Payment of Taxes. 

Sec. 250. (a) That except as otherwise pro- 
vided in this section and sections 221 and 237 
the tax shall be paid in four installments, each 
consisting of one-fourth of the total amount of the 
tax. The first installment shall be paid at the time 
fixed by law for filing the return, and the second 
installment shall be paid on the fifteenth day of the 
third month, the third installment on the fifteenth 
day of the sixth month, and the fourth installment 
on the fifteenth day of the ninth month, after the 
time fixed by law for filing the return. Where an 
extension of time for filing a return is granted the 
time for payment of the first installment shall be 
postponed until the date of the expiration of the 
period of the extension, but the time for payment 
of the other installments shall not be postponed 
unless the Commissioner so provides in granting 
the extension. In any case in which the time for 
the payment of any installment is at the request of 
the taxpayer thus postponed, there shall be added 
as a part of such installment interest thereon at the 
rate of one-half of i per centum per month from 
the time it would have been due if no extension 
had been granted, until paid. If any installment 
is not paid when due, the whole amount of the tax 
unpaid shall become due and payable upon notice 
and demand by the collector. 

The tax may at the option of the taxpayer be 
paid in a single payment instead of in installments, 
in which case the total amount shall be paid on or 
before the time fixed by law for filing the return, 
or, where an extension of time for filing the return 

88 



Sec. 250 



INCOME TAX— ADMINISTRATIVE PROVISIONS 

has been granted, on or before the expiration of the 
period of such extension. 

(b) As soon as practicable after the return is ^°,^7^'"'°['.^„V 
filed, the Commissioner shall examine it. If it then 
appears that the correct amount of the tax is greater 
or less than that shown in the return, the install- 
ments shall be recomputed. If the amount already Adjustment for 
paid exceeds that which should have been paid on 
the basis of the installments as recomputed, the ex- 
cess so paid shall be credited against the subsequent 
installments; and if the amount already paid ex- 
ceeds the correct amount of the tax, the excess shall 
be credited or refunded to the taxpayer in accord- 
ance with the provisions of section 252. 

If the amount already paid is less than that uniT^^en' 
which should have been paid, the difference, to 
the extent not covered by any credits due to the 
taxpayer under section 252 (hereinafter called 
"deficiency"), together with interest thereon at the 
rate of one-half of i per centum per month from 
the time the tax was due (or, if paid on the install- 
ment basis, on the deficiency of each installment 
from the time the installment was %ie) , shall be 
paid upon notice and demand by the collector. If 
any part of the deficiency is due to negligence or Penalty for 
intentional disregard of authorized rules and regu- Sndwrra"m.nt 
lations with knowledge thereof, but without intent 
to defraud, there shall be added as part of the tax 
5 per centum of the total amount of the deficiency 
in the tax, and interest in such a case shall be col- 
lected at the rate of i per centum per month on the 
amount of such deficiency in the tax from the time 
it was due (or, if paid on the installment basis, on 
the amount of the deficiency in each installment 
from the time the installment was due), which 

89 



Sec. 250 



Additional penalty 
for fraudulent 
statement 



Notice and 
demand 



Limitation on 
aaseaament 
within four years 
after return 
is aied 



REVENUE ACT OF 1921 

penalty and interest shall become due and payable 
upon notice and demand by the collector. If any 
part of the deficiency is due to fraud with intent 
to evade tax, then, in lieu of the penalty provided 
by section 3176 of the Revised Statutes, as amended, 
for false or fraudulent returns willfully made, but 
in addition to other penalties provided by law for 
false or fraudulent returns, there shall be added as 
part of the tax 50 per centum of the total amount 
of the deficiency in the tax. In such case the whole 
amount of the tax unpaid, including the penalty so 
added, shall become due and payable upon notice 
and demand by the collector. 

(c) If the return is made pursuant to section 
3176 of the Revised Statutes as amended, the 
amount of tax determined to be due under such 
return shall be paid upon notice and demand by 
the collector. 

(d) The amount of income, excess-profits, or 
war-profits taxes due under any return made under 
this Act for the taxable year 1921 or succeeding 
taxable years shall be determined and assessed by 
the Commissioner within four years after the re- 
turn was filed, and the amount of any such taxes 
due under any return made under this Act for prior 
taxable years or under prior income, excess-profits, 
or war-profits tax Acts, or under section 38 of the 
Act entitled "An Act to provide revenue, equalize 
duties, and encourage the industries of the United 
States, and for other purposes," approved August 
5, 1909, shall be determined and assessed within 
five years after the return was filed, unless both the 
Commissioner and the taxpayer consent in writing 
to a later determination, assessment, and collection 
of the tax; and no suit or proceeding for the collec- 



90 



Sec. 250 



INCOME TAX— ADMINISTRATIVE PROVISIONS 



tion of any such taxes due under this Act or under 
prior income, excess-profits, or war-profits tax 
Acts, or of any taxes due under section 38 of such 
Act of August 5, 1909, shall be begun, after the 
expiration of five years after the date when such 
return was filed, but this shall not afifect suits or Limitation on .uit 
proceedings begun at the time of the passage of 
this Act: Provided, That in the case of income 
received during the lifetime of a decedent, all 
taxes due thereon shall be determined and assessed 
by the Commissioner within one year after written 
request therefor by the executor, administrator, or 
other fiduciary representing the estate of such de- 
cedent: Provided further, That in the case of a 
false or fraudulent return with intent to evade tax, 
or of a failure to file a required return, the amount 
of tax due may be determined, assessed, and col- 
lected, and a suit or proceeding for the collection 
of such amount may be begun, at any time after it 
becomes due : Provided further, That in cases com- 
ing within the scope of paragraph (9) of subdivi- 
sion (a) of section 214, or of paragraph (8) of 
subdivision (a) of section 234, or in cases of final 
settlement of losses and other deductions tentatively 
allowed by the Commissioner pending a determi- 
nation of the exact amount deductible, the amount 
of tax or deficiency in tax due may be determined, 
assessed, and collected at any time; but prior to the 
assessment thereof the taxpayer shall be notified 
and given a period of not less than thirty days in 
which to file an appeal and be heard as hereinafter 
provided in this subdivision. 

If upon examination of a return made under the deficunc°y'^n ta'x 
Revenue Act of 19 16, the Revenue Act of 1917, ■•"^""p""" 
the Revenue Act of 1918, or this Act, a tax or a 

91 



Sec. 250 



A hearing 
permitted 



Exception 



Penalty for delay 
after notice and 
demand 



REVENUE ACT OF 1921 

deficiency in tax is discovered, the taxpayer shall 
be notified thereof and given a period of not less 
than thirty days after such notice is sent by regis- 
tered mail in which to file an appeal and show 
cause or reason why the tax or deficiency should 
not be paid. Opportunity for hearing shall be 
granted and a final decision thereon shall be made 
as quickly as practicable. Any tax or deficiency 
in tax then determined to be due shall be assessed 
and paid, together with the penalty and interest, 
if any, applicable thereto, within ten days after 
notice and demand by the collector as hereinafter 
provided, and in such cases no claim in abatement 
of the amount so assessed shall be entertained : Pro- 
vided, That in cases where the Commissioner be- 
lieves that the collection of the amount due will be 
jeopardized by such delay he may make the assess- 
ment without giving such notice or awaiting the 
conclusion of such hearing. 

(e) If any tax remains unpaid after the date 
when it is due, and for ten days after notice and 
demand by the collector, then, except in the case 
of estates of insane, deceased, or insolvent persons, 
there shall be added as part of the tax the sum of 
5 per centum on the amount due but unpaid, plus 
interest at the rate of i per centum per month upon 
such amount from the time it became due: Pro- 
vided, That as to any such amount which is the 
subject of a bona fide claim for abatement filed 
within ten days after notice and demand by the 
collector, where the taxpayer has not had the bene- 
fit of the provisions of subdivision (d), such sum 
of 5 per centum shall not be added and the interest 
from the time the amount was due until the claim 



92 



Sec. 250 
INCOME TAX— ADMINISTRATIVE PROVISIONS 

is decided shall be at the rate of one-half of i per 
centum per month on that part of the claim rejected. 

In the case of the first installment provided for J^t"^^'=eon"tuCte 
in subdivision (a) the instructions printed on the ^o^'fo^paymrn""* 
return shall be sufficient notice of the date v^^hen 
the tax is due and sufficient demand, and the tax- 
payer's computation of the tax on the return shall 
be sufficient notice of the amount due. In the case 
of each subsequent installment the collector may, 
within thirty days and not later than ten days be- 
fore the installment becomes due, mail to the tax- riSfirfem^demand 
payer notice of the amount of the installment and [Sltail'ment. 
the date on which it is due for payment. Such 
notice of the collector shall be sufficient notice and 
sufficient demand under this section. 

(f) In the case of any deficiency (except where ^/p^y^" nt of"" 
the deficiency is due to negligence or to fraud with deficiency 
intent to evade tax) where it is shown to the satis- 
faction of the Commissioner that the payment of 
such deficiency would result in undue hardship to 
the taxpayer, the Commissioner may, with the ap- 
proval of the Secretary, extend the time for the 
payment of such deficiency or any part thereof for 
such period not in excess of eighteen months from 
the passage of this Act as the Commissioner may 
determine. In such case the Commissioner may 
require the taxpayer to furnish a bond with suffi- 
cient sureties conditioned upon the payment of the 
deficiency in accordance with the terms of the ex- 
tension granted. There shall be added in lieu 
of other interest provided by law, as a part of such 
deficiency, interest thereon at the rate of two-thirds 
of I per centum per month from the time such ex- 
tension is granted ; except where such other interest 
provided by law is in excess of interest at the rate 

93 



Sec. 250 

REVENUE ACT OF 1921 

of two-thirds of i per centum per month. If the 
deficiency or any part thereof is not paid in ac- 
cordance with the terms of the extension granted, 
there shall be added as part of the deficiency, in 
lieu of other interest and penalties provided by 
law, the sum of 5 per centum of the deficiency and 
interest on the deficiency at the rate of i per centum 
per month from the time it becomes payable in 
accordance with the terms of such extension. 

maT^revin"" (s) ^^ ^^6 Commissioner finds that a taxpayer 

ewrt«"*° designs quickly to depart from the United States 

or to remove his property therefrom, or to conceal 
himself or his property therein, or to do any other 
act tending to prejudice or to render wholly or 
partly ineffectual proceedings to collect the tax for 
the taxable year then last past or the taxable year 
then current unless such proceedings be brought 
without delay, the Commissioner shall declare the 
taxable period for such taxpayer immediately 
terminated and shall cause notice of such finding 
and declaration to be given the taxpayer, together 
with a demand for immediate payment of the tax 
for the taxable period so declared terminated and 
of the tax for the preceding taxable year or so much 
of said tax as is unpaid, whether or not the time 
otherwise allowed by law for filing return and pay- 
ing the tax has expired; and such taxes shall there- 
upon become immediately due and payable. In 
any action or suit brought to enforce payment of 
taxes made due and payable by virtue of the pro- 
visions of this subdivision the finding of the Com- 
missioner, made as herein provided, whether made 
after notice to the taxpayer or not, shall be for all 
purposes presumptive evidence of the taxpayer's 
design. A taxpayer who is not in default in mak- 

94 



Sec. 250 

INCOME TAX— ADMINISTRATIVE PROVISIONS 

ing any return or paying income, war-profits, or 
excess-profits tax under any act of Congress may 
furnish to the United States, under regulations to 
be prescribed by the Commissioner with the ap- 
proval of the Secretary, security approved by the 
Commissioner that he will duly make the return 
next thereafter required to be filed and pay the 
tax next thereafter required to be paid. The Com- 
missioner may approve and accept in like manner 
security for return and payment of taxes made due 
and payable by virtue of the provisions of this sub- 
division, provided the taxpayer has paid in full all 
other income, war-profits, or excess-profits taxes 
due from him under any act of Congress. If se- 
curity is approved and accepted pursuant to the 
provisions of this subdivision and such further or 
other security with respect to the tax or taxes cov- 
ered thereby is given as the Commissioner shall 
from time to time find necessary and require, pay- 
ment of such taxes shall not be enforced by any 
proceedings under the provisions of this subdivi- 
sion prior to the expiration of the time otherwise 
allowed for paying such respective taxes. In the ixTa^wXe"" 

ITT'IO 1_ J requirements 

case of a citizen of the United States about to de- for^uLi^en uaving 
part from the United States the Commissioner may, 
at his discretion, waive any or all of the require- 
ments placed on the taxpayer by this subdivision. 
No alien shall depart from the United States un- ^jf^tob?"""^ 
less he first secures from the collector or agent in 
charge a certificate that he has complied with all 
the obligations imposed upon him by the income, 
war-profits, and excess-profits tax laws. If a tax- 
payer violates or attempts to violate this subdivi- 
sion there shall, in addition to all other penalties, 

95 



clearance certificate 



Sec. 251 



Receipts for taxes 
upon request 



REVENUE ACT OF 1921 

be added as part of the tax 25 per centum of the 
total amount of the tax or deficiency in the tax, 
together with interest at the rate of i per centum 
per month from the time the tax became due. 

(h) The provisions of subdivisions (e), (f) and 
(g) of this section shall apply to the assessment 
and collection of taxes which have accrued or may 
accrue under the Revenue Act of 1917, the Reve- 
nue Act of 191 8 or this Act. 

Receipts for Taxes. 

Sec. 251. That every collector to whom any pay- 
ment of any tax is made under the provisions of this 
title shall upon request give to the person making 
such payment a full written or printed receipt, 
stating the amount paid and the particular account 
for which such payment was made; and whenever 
any debtor pays taxes on account of payments made 
or to be made by him to separate creditors the col- 
lectors shall, if requested by such debtor, give a 
separate receipt for the tax paid on account of 
each creditor in such form that the debtor can con- 
veniently produce such receipts separately to his 
several creditors in satisfaction of their respective 
demands up to the amounts stated in the receipts; 
and such receipt shall be sufficient evidence in 
favor of such debtor to justify him in withholding 
from his next payment to his creditor the amount 
therein stated ; but the creditor may, upon giving to 
his debtor a full written receipt acknowledging 
the payment to him of any sum actually paid and 
accepting the amount of tax paid as aforesaid 
(specifying the same) as a further satisfaction of 
the debt to that amount, require the surrender to 
him of such collector's receipt. 

96 



Sec. 252 

INCOME TAX— ADMINISTRATIVE PROVISIONS 

Refunds. 

Sec. 252. That if, upon examination of any re- Refund, 
turn of income made pursuant to this Act, the Act 
of August 5, 1909, entitled "An Act to provide 
revenue, equalize duties, and encourage the indus- 
tries of the United States, and for other purposes," 
the Act of October 3, 1913, entitled "An Act to 
reduce tariff duties and to provide revenue for the 
Government, and for other purposes," the Revenue 
Act of 1 916, as amended, the Revenue Act of 19 17, 
or the Revenue Act of 191 8, it appears that an 
amount of income, war-profits or excess-profits tax 
has been paid in excess of that properly due, then, 
notwithstanding the provisions of section 3228 of 
the Revised Statutes, the amount of the excess shall 
be credited against any income, war-profits or ex- 
cess-profits taxes, or installment thereof, then due 
from the taxpayer under any other return, and any 
balance of such excess shall be immediately re- 
funded to the taxpayer: Provided, That no such 5 year limitation 
credit or refund shall be allowed or made after refund 
five years from the date when the return was due, 
unless before the expiration of such five years a 
claim therefor is filed by the taxpayer: Provided Exception of refund 
further, That if upon examination of any return of invMtedMpitai 
income made pursuant to the Revenue Act of 1917, 
the Revenue Act of 1918, or this Act, the invested 
capital of a taxpayer is decreased by the Commis- 
sioner, and such decrease is due to the fact that the 
taxpayer failed to take adequate deductions in 
previous years, with the result that an amount of 
income tax in excess of that properly due was paid 
in any previous year or years, then, notwithstand- 
ing any other provisions of law and regardless of 
the expiration of such five-year period, the amount 

97 



Sees. 253, 254 



Certain claims 
previously filed 
allowed 



REVENUE ACT OF 1921 

of such excess shall, without the filing of any claim 
therefor, be credited or refunded as provided in 
this section : And provided further, That nothing 
in this section shall be construed to bar from allow- 
ance claims for refund filed prior to the passage 
of the Revenue Act of 1918 under subdivision (a) 
of section 14 of the Revenue Act of 191 6, or filed 
prior to the passage of this Act under section 252 
of the Revenue Act of 191 8. 



ena 



hies. 



Penalties 



Sec. 253. That any individual, corporation, or 
partnership required under this title to pay or col- 
lect any tax, to make a return or to supply informa- 
tion, who fails to pay or collect such tax, to make 
such return, or to supply such information at the 
time or times required under this title, shall be 
liable to a penalty of not more than $1,000. Any 
individual, corporation, or partnership, or any offi- 
cer or employee of any corporation or member or 
employee of a partnership, who willfully refuses 
to pay or collect such tax, to make such return, or 
to supply such information at the time or times 
required under this title, or who willfully attempts 
in any manner to defeat or evade the tax imposed 
by this title, shall be guilty of a misdemeanor and 
shall be fined not more than $10,000 or imprisoned 
for not more than one year, or both, together with 
the costs of prosecution. 



Return of 
dividends paid 



Returns of Payments of Dividends. 

Sec. 254. That every corporation subject to the 
tax imposed by this title and every personal service 
corporation shall when required by the Commis- 
sioner, render a correct return, duly verified under 

98 



Sec. 255, 256 
INCOME TAX— ADMINISTRATIVE PROVISIONS 

oath, of its payments of dividends, stating the name 
and address of each stockholder, the number of 
shares owned by him, and the amount of dividends 
paid to him. 

Returns of Brokers. 

Sec. 2C c. That every individual, corporation, or Broke™- 

1 • J • t • 11 1 11 1 information 

partnership domg busmess as a broker shall, when ret-"-"" 
required by the Commissioner, render a correct re- 
turn duly verified under oath, under such rules and 
regulations as the Commissioner, with the approval 
of the Secretary, may prescribe, showing the names 
of customers for whom such individual, corpora- 
tion, or partnership has transacted any business, 
with such details as to the profits, losses, or other 
information which the Commissioner may require, 
as to each of such customers, as will enable the 
Commissioner to determine whether all income tax 
due on profits or gains of such customers has been 
paid. 1 

Information at Source. 

Sec. 2 1;6. That all individuals, corporations, and Return»of 

-' , , ' ^ ' information of 

partnerships, in whatever capacity acting, includ- ^?^'e*in°ln *''""' 
ing lessees or mortgagors of real or personal prop- t«''='''i« y«" 
erty, fiduciaries, and employers, making payment 
to another individual, corporation, or partnership, 
of interest, rent, salaries, wages, premiums, annui- 
ties, compensations, remunerations, emoluments, or 
other fixed or determinable gains, profits, and in- 
come (other than payments described in sections 
254 and 255), of $1,000 or more in any taxable 
year, or in the case of such payments made by the 
United States, the officers -or employees of the 
United States having information as to such pay- 
ments and required to make returns in regard 

99 



Sec. 257 



Information of 
interest on 
corporate 
obligations 
res^ardless of 
a mount 



Name and address 
of recipient 
may be 
demanded 



Provisions effective 
and no information 
of U. S. bond 
interest necessary 



Returns to be 
public records 



REVENUE ACT OF 1921 

thereto by the regulations hereinafter provided for, 
shall render a true and accurate return to the Com- 
missioner, under such regulations and in such form 
and manner and to such extent as may be prescribed 
by him with the approval of the Secretary, setting 
forth the amount of such gains, profits, and income, 
and the name and address of the recipient of such 
payment. 

Such" returns may be required, regardless of 
amounts, (i) in the case of payments of interest 
upon bonds, mortgages, deeds of trust, or other 
similar obligations of corporations, and (2) in the 
case of collections of items (not payable in the 
United States) of interest upon the bonds of foreign 
countries and interest upon the bonds of and divi- 
dends from foreign corporations by individuals, 
corporations, or partnerships, undertaking as a 
matter of business or for profit the collection of 
foreign payments of such interest or dividends by 
means of coupons, checks, or bills of exchange. 

When necessary to make effective the provisions 
of this section the name and address of the re- 
cipient of income shall be furnished upon demand 
of the individual, corporation, or partnership pay- 
ing the income. 

The provisions of this section shall apply to the 
calendar year 1921 and each calendar year there- 
after, but shall not apply to the payment of interest 
on obligations of the United States. 

Returns to be Public Records. 

Sec. 257. That returns upon which the tax has 
been determined by the Commissioner shall con- 
stitute public records; but they shall be open to 
inspection only upon order of the President and 



100 



Sec. 258 
INCOME TAX— ADMINISTRATIVE PROVISIONS 

under rules and regulations prescribed by the Sec- 
retary and approved by the President: Provided, Z^;V^;^'°"''"" 
That the proper officers of any State imposing an "■""'"' 
income tax may, upon the request of the governor 
thereof, have access to the returns of any corpora- 
tion, or to an abstract thereof shov^^ing the name and 
income of the corporation, at such times and in 
such manner as the Secretary may prescribe: Pro- stockholder. of 

, J J r record may inspect 

vtded further. That all bona fide stockholders of "^^^Jti"^^'"' 
record owning i per centum or more of the out- "°''' 
standing stock of any corporation shall, upon mak- 
ing request of the Commissioner, be allowed to 
examine the annual income returns of such corpor- 
ation and of its subsidiaries. Any stockholder who Penalty for 

■^ disclosure or 

pursuant to the provisions of this section is allowed '"«='" 
to examine the return of any corporation, and who 
makes known in any manner whatever not provided 
by law the amount or source of income, profits, 
losses, expenditures, or any particular thereof, set 
forth or disclosed in any such return, shall be guilty 
of a misdemeanor and be punished by a fine not 
exceeding $i,ooo, or by imprisonment not exceed- 
ing one year, or both. 

rr»l /^ •. 1-11 i' ■t^^ CommUaioner to 

Ihe Commissioner shall as soon as practicable pubiuhiutof 
in each year cause to be prepared and made avail- 
able to public inspection in such manner as he may 
determine, in the office of the collector in each 
internal-revenue district and in such other places 
as he may determine, lists containing the names and 
the post-office addresses of all individuals making 
income-tax returns in such district. 

Publication of Statistics. 

Sec. 258. That the Commissioner, with the ap- ftatlitrc.'"" °' 
proval of the Secretary, shall prepare and publish 

lOI 



Sees. 259, 260 



Collection of 
foreign items 



Penalty for 
violation 



Tax on income 
from within the 
U. S. for 
citizens of U. S. 
possessions 



REVENUE ACT OF 1921 

annually statistics reasonably available with re- 
spect to the operation of the income, war-profits 
and excess-profits tax laws, including classifications 
of taxpayers and of income, the amounts allowed 
as deductions, exemptions, and credits, and any 
other facts deemed pertinent and valuable. 

Collection of Foreign Items. 

Sec. 259. That all individuals, corporations, or 
partnerships undertaking as a matter of business 
or for profit the collection of foreign payments of 
interest or dividends by means of coupons, checks, 
or bills of exchange shall obtain a license from the 
Commissioner and shall be subject to such regu- 
lations enabling the Government to obtain the in- 
formation required under this title as the Com- 
missioner, with the approval of the Secretary, shall 
prescribe; and whoever knowingly undertakes to 
collect such payments without having obtained a 
license therefor, or without complying with such 
regulations, shall be guilty of a misdemeanor and 
shall be fined not more than $5,000, or imprisoned 
for not more than one year, or both. 

Citizens of Possessions of the United States. 

Sec. 260. That any individual who is a citizen of 
any possession of the United States (but not other- 
wise a citizen of the United States) and who is not 
a resident of the United States, shall be subject to 
taxation under this title only as to income derived 
from sources within the United States, and in such 
case the tax shall be computed and paid in the same 
manner and subject to the same conditions as in 
the case of other persons who are taxable only as 
to income derived from such sources. 



102 



Sees. 261, 262 
INCOME TAX— ADMINISTRATIVE PROVISIONS 

Nothing in this section shall be construed to ^i,7iffilled"*' 
alter or amend the provisions of the Act entitled 
"An Act making appropriations for the naval ser- 
vice for the fiscal year ending June 30, 1922, and 
for other purposes," approved July 12, 1921, re- 
lating to the imposition of income taxes in the 
Virgin Islands of the United States. 

Porto Rico and Philippine Islands. 
Sec. 261. That in Porto Rico and the Philippine pp^t-Ri'"?"^ . 

^ ^ Philippine Islands 

Islands the income tax shall be levied, assessed, ^^^°ded*" 
collected, and paid as provided by law prior to the 
passage of this Act. 

The Porto Rican or Philippine Legislature shall ^eT^^PhrCin. 
have power by due enactment to amend, alter, '^s'''^*""" 
modify, or repeal the income tax laws in force in 
Porto Rico or the Philippine Islands, respectively. 

Income From Sources Within the Possessions of 
the United States, 

Sec. 262. (a) That in the case of citizens of the income from 

\ / sources within 

United States or domestic corporations, satisfying "isfes^ons 
the following conditions, gross income means only 
gross income from sources within the United 
States — 

(i) If 80 per centum or more of the gross in- source of8o% 

^' ^ , ci'or more of gross 

come of such citizen or domestic corporation (com- l,"'^^^;^'?'^"" 
puted without the benefit of this section) for the <=°>-po"«<"> 
three-year period immediately preceding the close 
of the taxable year (or for such part of such period 
immediately preceding the close of such taxable 
year as may be applicable) was derived from 
sources within a possession of the United States; 
and 

103 



(See (b) below) 



Sees. 263, 300 



Source of 50% 
or more of gross 
income, 
corporation 



Source of 50% 
or more of gross 
income* citizen or 
principal or agent 



Citizens or 
cor per a t ions 
under (a) to 
include amounts 
in gross income 



Virgin Islands not 
a U. S. possession 
under section 262 



Effective date of 
title 



Definitions 



REVENUE ACT OF 1921 

(2) If, in the case of such corporation, 50 per 
centum or more of its gross income (computed 
without the benefit of this section) for such period 
or such part thereof was derived from the active 
conduct of a trade or business within a possession 
of the United States; or 

(3) If, in the case of such citizen, 50 per centum 
or more of his gross income (computed without 
the benefit of this section) for such period or such 
part thereof was derived from the active conduct 
of a trade or business within a possession of the 
United States either on his own account or as an 
employee or agent of another. 

(b) Notwithstanding the provisions of subdi- 
vision (a) there shall be included in gross income 
all amounts received by such citizens or corpor- 
ations within the United States, whether derived 
from sources within or without the United States. 

(c) As used in this section the term "possession 
of the United States does not include the Virgin 
Islands of the United States. 

Effective Date of Title. 

Sec. 263. That this title shall take effect as of 
January i, 1921. 

Title III.— War-Profits And Excess-Profits 

Tax For 1921. 

Part I.— General Definitions. 

Sec. 300. That when used in this title the terms 
"taxable year," "fiscal year," "personal service 
corporation," "paid or accrued," and "dividends" 
shall have the same meaning as provided for the 
purposes of income tax in sections 200 and 201. 



104 



Sec. 301 
EXCESS PROFITS TAX— IMPOSITION OF TAX 

Part II. — Imposition of Tax. 

Sec. 301. (a) That in lieu of the tax imposed by Excesfp'ofi'."" 
Title III of the Revenue Act of 1918, but in ad- 
dition to the other taxes imposed by this Act, there 
shall be levied, collected and paid for the calendar 
year 1921 upon the net income of every corporation 
(except corporations taxable under subdivision (b) 
of this section) a tax equal to the sum of the 
following: 

First Bracket. 

20 per centum of the amount of the net income 
in excess of the excess-profits credit (determined 
under section 312) and not in excess of 20 per 
centum of the invested capital ; 

Second Bracket. 

40 per centum of the amount of the net income 
in excess of 20 per centum of the invested capital. 

(b) For the calendar year 1921 there shall be g"„';''™^';'J,'^ 
levied, collected, and paid upon the net income of '""t"^'" 
every corporation which derives in such year a net 
income of more than $10,000 from any Govern- 
ment contract or contracts made between April 6, 
1917, and November 11, 1918, both dates inclusive, 
a tax equal to the sum of the following : 

(i) Such a portion of a tax computed at the fo^p°[ati„„ 
rates specified in subdivision (a) of section 301 of f"-- G°ve«-nment 
the Revenue Act of 1918, as the part of the net in- 
come attributable to such Government contract or 
contracts bears to the entire net income. In com- 
puting such tax the excess-profits credit and the 
war-profits credit which would be applicable to 

105 



contract 



Sec. 302 



Apportionment 
of Government 
contract income 



Credit in excess 
of first bracket 



Limitation on 
amount of tax 



REVENUE ACT OF 1921 

such calendar year under the Revenue Act of 191 8 
if it had been continued in force, shall be used; 

(2) Such a portion of a tax computed at the 
rates specified in subdivision (a) of this section as 
the part of the net income not attributable to such 
Government contract or contracts bears to the en- 
tire net income. 

For the purpose of determining the part of the 
net income attributable to such Government con- 
tract or contracts, the proper apportionment and 
allocation of the deductions with respect to gross 
income derived from such Government contract 
or contracts and from other sources, respectively, 
shall be determined under rules and regulations 
prescribed by the Commissioner with the approval 
of the Secretary. 

(c) In any case where the full amount of the 
excess-profits credit is not allowed under the first 
bracket of subdivision (a), by reason of the fact 
that such credit is in excess of 20 per centum of the 
invested capital, the part not so allowed shall be 
deducted from the amount in the second bracket. 

Sec. 302. That the tax imposed by subdivision 
(a) of section 301 shall in no case be more than 20 
per centum of the amount of the net income in 
excess of $3,000 and not in excess of $20,000, plus 
40 per centum of the amount of the net income in 
excess of $20,000; and the limitations imposed by 
section 302 of the Revenue Act of 1918 (upon 
taxes computed under subdivision (c) of section 
301 of that Act) are hereby made applicable to 
taxes computed under subdivision (b) of section 
301 of this Act. Nothing in this section shall be 

106 



Sees. 303, 304 
EXCESS PROFITS TAX— IMPOSITION OF TAX 

construed in such manner as to increase the tax 
imposed by section 301 of this Act. 

Sec. 303. That if part of the net income of a corpo- 3o°%'i'ncome from 

^' • 1 ' 1 / \ y- 1 «. / personal service 

ration is derived ( i ) from a trade or business (or a 
branch of a trade or business) in which the employ- 
ment of capital is necessary, and (2) a part (consti- 
tuting not less than 30 per centum of its total net in- 
come) is derived from a separate trade or business 
(or a distinctly separate branch of the trade or busi- 
ness) which if constituting the sole trade or business 
would bring it within the class of "personal service 
corporations," then (under regulations prescribed 
by the Commissioner with the approval of the Sec- 
retary) the tax upon the first part of such net in- 
come shall be separately computed (allowing in 
such computation only the same proportionate part 
of the credits authorized in section 312), and the 
tax upon the second part shall be the same percent- 
age thereof as the tax so computed upon the first 
part is of such first part: Provided, That the tax of "a, 
upon such second part shall in no case be less than 
20 per centum thereof, unless the tax upon the en- 
tire net income, if computed without benefit of this 
section, would constitute less than 20 per centum of 
such entire net income, in which event the tax shall 
be determined upon the entire net income, without 
reference to this section, as other taxes are de- 
termined under this title. The total tax computed 
under this section shall be subject to the limitations 
pfbvided in section 302. 

Sec. 304. (a) That the corporations enumerated ^'"p^uon, 
in section 231 shall, to the extent that they are ex- 
empt from income tax under Title II, be exempt 
from taxation under this title. 

107 



Limitation 



Sees. 305, 312, 320 



Corporation with 
less than $3,000 
net income exempt 



Income from 
gold mining 
exempt 



Tax for less 
than 12 months 
exemption 
apportioned 



Specific exemption 
of $3»000 and 
amount of 
excess-profits 
credit 



Foreign corporation 
no specific exemption 
of $3,000 



Net income 
ascertained 



REVENUE ACT OF 1921 

(b) Any corporation whose net income for the 
taxable year is less than $3,000 shall be exempt 
from taxation under this title. 

(c) In the case of any corporation engaged in 
the mining of gold, the portion of the net income 
derived from the mining of gold shall be exempt 
from the tax imposed by this title or any tax im- 
posed by Title II of the Revenue Act of 1917, and 
the tax on the remaining portion of the net income 
shall be the same proportion of a tax computed 
without the benefit of this subdivision which such 
remaining portion of the net income bears to llie 
entire net income. 

Sec. 305. That if a tax is computed under this 
title for a period of less than twelve months, the 
specific exemption of $3,000, wherever referred to 
in this title, shall be reduced to an amount which 
is the same proportion of $3,000 as the number of 
months in the period is of twelve months. 

Part III. — Excess-Profits Credit. 

Sec. 3 1 2. That the excess-profits credit shall con- 
sist of a specific exemption of $3,000 plus an 
amount equal to 8 per centum of the invested cap- 
ital for the taxable year. 

A foreign corporation or a corporation entitled 
to the benefits of section 262 shall not be entitled to 
the specific exemption of $3,000. 

Part IV.— Net Income. 

Sec 320. That for the purpose of this title the 
net income of a corporation shall be ascertained 
and returned for the taxable year upon the same 
basis and in the same manner as provided for in- 
come tax purposes in Title II of this Act. 

108 



Sec. 325 
EXCESS PROFITS TAX— INVESTED CAPITAL 

Part V. — Invested Capital. 

Sec. 325. (a) That as used in this title — Definition. 

The term "intangible property" means patents, pj"^"t^^"* 
copyrights, secret processes and formulae, good 
will, trade-marks, trade-brands, franchises, and 
other like property; 

The term "tangible property" means stocks, "Tangible 

O r r J .111 property 

bonds, notes, and other evidences of indebtedness, 
bills and accounts receivable, leaseholds, and other 
property other than intangible property; 

The term "borrowed capital" means money or |_'Borrowed 
other property borrowed, whether represented by 
bonds, notes, open accounts, or otherwise ; 

The term "inadmissible assets" means stocks, Zeu'^'"'"" 
bonds, and other obligations (other than obliga- 
tions of the United States), the dividends or in- 
terest from which is not included in computing net 
income, but where the income derived from such 
assets consists in part of gain or profit derived 
from the sale or other disposition thereof, or where 
all or part of the interest derived from such assets 
is in effect included in the net income because of 
the limitation on the deduction of interest under 
paragraph (2) of subdivision (a) of section 234, a 
corresponding part of the capital invested in such 
assets shall not be deemed to be inadmissible assets ; 

The term "admissible assets" means all assets "Admissible asset.- 
other than inadmissible assets, valued in accord- 
ance with the provisions of subdivision (a) of 
section 326 and section 331. 

(b) For the purposes of this title the par value ^^^"^J'^^^""^ 
of stock or shares shall, in the case of stock or 
shares issued at a nominal value or having no par 

109 



Sec. 326 



"Invested capital" 
defined 



Cash paid for 
shares 



Value of 
tangible property 



REVENUE ACT OF 1921 

value, be deemed to be the fair market value as of 
the date or dates of issue of such stock or shares. 

Sec. 326. (a) That as used in this title the term 
"invested capital" for any year means (except as 
provided in subdivision (b) and (c) of this sec- 
tion) : 

( 1 ) Actual cash bona fide paid in for stock or 
shares ; 

(2) Actual cash value of tangible property, other 
than cash, bona fide paid in for stock or shares, at 
the time of such payment, but in no case to exceed 
the par value of the original stock or shares speci- 
fically issued therefor, unless the actual cash value 
of such tangible property at the time paid in is 
shown to the satisfaction of the Commissioner to 
have been clearly and substantially rn excess of 
such par value, in w^hich case such excess shall be 
treated as paid-in surplus: Provided, That the 
Commissioner shall keep a record of all cases in 
which tangible property is included in invested 
capital at a value in excess of the stock or shares is- 
sued therefor, containing the name and address of 
each taxpayer, the business in which engaged, the 
amount of invested capital and net income shown 
by the return, the value of the tangible property 
at the time paid in, the par value of the stock or 
shares specifically issued therefor, and the amount 
included under this paragraph as paid-in surplus. 
The Commissioner shall furnish a copy of such 
record and other detailed information with re- 
spect to such cases when required by resolution of 
either House of Congress, without regard to the re- 
strictions contained in section 257; 

no 



Sec. 326 
EXCESS PROFITS TAX— INVESTED CAPITAL 

(3) Paid-in or earned surplus and undivided Tnd'undwidld' 
profits ; not including surplus and undivided profits ""'**• 
earned during the year; 

(4) Intangible property bona fide paid in for p"o^ftypaid 
stock or shares prior to March 3, 1917, in an M^ch's'isi? 
amount not exceeding (a) the actual cash value of 

such property at the time paid in, (b) the par value 
of the stock or shares issued therefor, or (c) in the 
aggregate 25 per centum of the par value of the 
total stock or shares of the corporation outstanding 
on March 3, 1917, whichever is lowest; 

(5) Intangible property bona fide paid in for J,';j^^j;'^''aid i„ 
stock or shares on or after March 3, 1917, in an after March 3, 1917 
amount not exceeding (a) the actual cash value of 

such property at the time paid in, (b) the par value 
of the stock or shares issued therefor, or (c) in the 
aggregate 25 per centum of the par value of the 
total stock or shares of the corporation outstanding 
at the beginning of the taxable year, whichever is 
lowest: Provided, That in no case shall the total 
amount included under paragraphs (4) and (5) 
exceed in the aggregate 25 per centum of the pur 
value of the total stock or shares of the corporation 
outstanding at the beginning of the taxable year; 
but 

(b) As used in this title the term "invested cap- do«not1n"i^d:'" 
ital" does not include borrowed capital. 

(c) There shall be deducted from invested cap- ^.Tdwsl'bi. a..et. 
ital as above defined a percentage thereof equal to '<'''« <»«<»"='•■» 
the percentage which the amount of inadmissible 

assets is of the amount of admissible and inadmis- 
sible assets held during the taxable year. 

(d) The invested capital for any period shall Jp^Vtlo"""'' 
be the average invested capital for such period, but "'"''"■■ 

III 



Sec. 327 



Determination of 
tax as in section 
328 



Unable to 
determine 
invested capital 



Foreign 
corporation 



Values not 
determined 



Abnormal 
conditions 



REVENUE ACT OF 1921 

in the case of a corporation making a return for a 
fractional part of a year, it shall be the same frac- 
tional part of such average invested capital. 

Sec. 327. That in the following cases the tax 
shall be determined as provided in section 328 : 

(a) Where the Commissioner is unable to de- 
termine the invested capital as provided in section 
326; 

(b) In the case of a foreign corporation or of 
a corporation entitled to the benefits of section 262 ; 

(c) Where a mixed aggregate of tangible prop- 
erty and intangible property has been paid in for 
stock or for stock and bonds and the Commission- 
er is unable satisfactorily to determine the respect- 
ive values of several classes of property at the 
time of payment, or to distinguish the classes of 
property paid in for stock and for bonds, re- 
spectively; 

(d) Where upon application by the corpor- 
ation the Commissioner finds and so declares of 
record that the tax if determined without benefit 
of this section would, owing to abnormal condi- 
tions affecting the capital or income of the corpor- 
ation, work upon the corporation an exceptional 
hardship evidenced by gross disproportion between 
the tax computed without benefit of this section and 
the tax computed by reference to the representa- 
tive corporations specified in section 328. This 
subdivision shall not apply to any case ( i ) in which 
the tax (computed without benefit of this section) 
is high merely because the corporation earned 
within the taxable year a high rate of profit upon a 
normal invested capital, nor (2) in which 50 per 

112 



Sec. 328 
EXCESS PROFITS TAX— INVESTED CAPITAL 

centum or more of the gross income of the corpor- 
ation for the taxable year (computed under section 
233 of Title II) consists of gains, profits, commis- 
sions, or other income, derived on a cost-plus basis 
from a Government contract or contracts made be- 
tween April 6, 1917, and November 11, 1918, both 
dates inclusive. 

Sec. 328. (a) That in the cases specified in Basufor 

^ ^ -. iti computation of tax 

section 327 the tax shall be the amount which bears "nJer section 327 
the same ratio to the net income of the taxpayer 
(in excess of the specific exemption of $3,000) for 
the taxable year, as the average tax of representa- 
tive corporations engaged in a like or similar trade 
or business, bears to their average net income (in 
excess of the specific exemption of $3,000) for such 
year. In the case of a foreign corporation or of a 
corporation entitled to the benefits of section 262 
the tax shall be computed without deducting the 
specific exemption of $3,000 either for the tax- 
payer or the representative corporations. 

In computing the tax under this section the Com- ^""^entrtlv^"" 
missioner shall compare the taxpayer only with "'P"""""' 
representative corporations whose invested capital 
can be satisfactorily determined under section 326 
and which are, as nearly as may be, similarly 
circumstanced with respect to gross income, net in- 
come, profits per unit of business transacted and 
capital employed, the amount and rate of war 
profits or excess profits, and all other relevant facts 
and circumstances. 



(b) For the purposes of subdivision (a) the J^"^°t°(,'^;^ 
ratios between the average tax and the average net 
income of representative corporations shall be de- 
termined by the Commissioner in accordance with 



"3 



Sec. 331 



Records to b* 
kept by 
Commisaioner 



Congress may 
inspect such 
records 



REVENUE ACT OF 1921 

regulations prescribed by him with the approval 
of the Secretary. 

(c) The Commissioner shall keep a record of 
all cases in which the tax is determined in the 
manner prescribed in subdivision (a), containing 
the name and address of each taxpayer, the bus- 
iness in which engaged, the amount of invested 
capital and net income shown by the return, and the 
amount of invested capital as determined under 
such subdivision. The Commissioner shall furnish 
a copy of such record and other detailed informa- 
tion with respect to such cases when required by 
resolution of either House of Congress, without 
regard to restrictions contained in section 257. 



Reorg^anization 
after March 3, 1917 
(See also Sec. 229) 



Part VI . — Reorganizations. 

Sec. 331. That in the case of the reorganiza- 
tion, consolidation, or change of ownership of a 
trade or business, or change of ownership or prop- 
erty, after March 3, 191 7, if an interest or control 
in such trade or business or property of 50 per 
centum or more remains in the same persons, or 
any of them, then no asset transferred or received 
from the previous owner shall, for the purpose of 
determining invested capital, be allowed a greater 
value than would have been allowed under this 
title in computing the invested capital of such pre- 
vious owner if such asset had not been so trans- 
ferred or received: Provided, That if such pre- 
vious owner was not a corporation, then the value 
of any asset so transferred or received shall be 
taken at its cost of acquisition (at the date when 
acquired by such previous owner) with proper al- 
lowance for depreciation, impairment, betterment 
or development, but no addition to the original 

114 



Sec. 335 



EXCESS PROFITS TAX— MISCELLANEOUS 

cost shall be made for any charge or expenditure 
deducted as expense or otherwise on or after 
March i, 1913, in computing the net income of 
such previous owner for purposes of taxation. 

Part VII. — Miscellaneous. 

Sec. 335. (a) That if a corporation (other than ^,'|.^'j"™""°' 
a personal service corporation) makes return for a "Jp"ti.^"i„, 
fiscal year beginning in 1920 and ending in 1921, 
the war-profits and excess-profits tax for the tax- 
able year 1921 shall be the sum of: (i) the same 
proportion of a tax for the entire period computed 
under the Revenue Act of 191 8, which the portion 
of such period falling within the calendar year 
1920 is of the entire period, and (2) the same pro- 
portion of a tax for the entire period computed 
under this title, which the portion of such period 
falling within the calendar year 1921 is of the 
entire period. Any amount heretofore or here- credit or nf una 
after paid on account of the tax imposed for such °'*"""'' ''''"' 
taxable year by the Revenue Act of 191 8 shall be 
credited towards the payment of the tax as above 
computed, and if the amount so paid exceeds the 
amount of such tax, the excess shall be credited or 
refunded to the corporation in accordance with the 
provisions of section 252 of this Act. 

(b) If a corporation (other than a personal ser- ^li^^^i" 
vice corporation) makes a return for a fiscal year "■•po"«<">« 
beginning in 1921 and ending in 1922, the war- 
profits and excess-profits tax for the portion of the 
year falling within the calendar year 1921 shall be 
an amount equivalent to the same proportion of a 
tax for the entire period computed under this title, 
which the portion of such period falling within the 
calendar year 1921 is of the entire period. 

"5 



Sees. 336-338, 400 



Every corporation 
not exempt under 
section 304 to make 
a return 



Tax limited on 
profits from sale of 
natural resources 



Effective date of 
titis 



Definitions 
"Executor" 



*Net estate" 



"Month" 



REVENUE ACT OF 1921 

Sec. 336. That every corporation, not exempt 
under section 304, shall make a return for the 
purposes of this title. Such returns shall be made, 
and the taxes imposed by this title shall be paid, at 
the same times and places, in the same manner, and 
subject to the same conditions, as is provided in 
the case of returns and payment of income tax by 
corporations for the purposes of Title II, and all 
the provisions of that title not inapplicable, in- 
cluding penalties, are hereby made applicable to 
the taxes imposed by this title. 

Sec. 337. That in the case of a bona fide sale 
of mines, oil or gas wells, or any interest therein, 
where the principal value of the property has been 
demonstrated by prospecting or exploration and 
discovery work done by the taxpayer, the portion 
of the tax imposed by this title attributable to 
such sale shall not exceed 20 per centum of the 
selling price of such property or interest. 

Elective Date of Title. 

Sec. 338. That this title shall take effect as of 
January i, 1921. 

Title IV.— Estate Tax. 

Sec. 400. That when used in this title — 

The term "executor" means the executor or ad- 
ministrator of the decedent, or, if there is no ex- 
ecutor or administrator, any person in actual or 
constructive possession of any property of the de- 
cedent; 

The term "net estate" means the net estate as de- 
termined under the provisions of section 403 ; 

The term "month" means calendar month; and 

116 



Sec. 401 



ESTATE TAX 

The term "Collector" means the collector of in- "coUector" 
ternal revenue of the district in which was the 
domicile of the decedent at the time of his death, 
or, if there was no such domicile in the United 
States, then the collector of the district in which is 
situated the part of the gross estate of the decedent 
in the United States, or, if such part of the gross 
estate is situated in more than one district, then 
the collector of internal revenue of such district 
as may be designated by the Commissioner. 



Tax on net estate 



Sec. 401. That, in lieu of the tax imposed by 
Title IV of the Revenue Act of 191 8, a tax equal to 
the sum of the following percentages of the value of 
the net estate (determined as provided in section 
403) is hereby imposed upon the transfer of the 
net estate of every decedent dying after the passage 
of this Act, whether a resident or nonresident of 
the United States : 

1 per centum of the amount of the net estate not "*"'" °' '" 
in excess of $50,000; 

2 per centum of the amount by which the net 
estate exceeds $5^^0,000 and does not exceed 
$150,000; 

3 per centum of the amount by which the net 
estate exceeds $150,000 and does not exceed 
$250,000 ; 

4 per centum of the amount by which the net 
estate exceeds $250,000 and does not exceed 
$450,000 ; 

6 per centum of the amount by which the net 
estate exceeds $450,000 and does not exceed 
$750,000; 

117 



Sec. 401 



Estate of decedent 
in service of army 
or navy in Great 
War* when 
exempted 



REVENUE ACT OF 1921 

8 per centum of the amount by which the net 
estate exceeds $750,000 and does not exceed 
$1,000,000; 

10 per centum of the amount by which the net 
estate exceeds $1,000,000 and does not exceed 
$1,500,000; 

1 2 per centum of the amount by which the net 
estate exceeds $1,500,000 and does not exceed 
$2,000,000 ; 

14 per centum of the amount by which the net 
estate exceeds $2,000,000 and does not exceed 
$3,000,000; 

16 per centum of the amount by which the net 
estate exceeds $3,000,000 and does not exceed 
$4,000,000; 

18 per centum of the amount by which the net 
estate exceeds $4,000,000 and does not exceed 
$5,000,000 ; 

20 per centum of the amount by which the net 
estate exceeds $5,000,000 and does not exceed 
$8,000,000 ; 

22 per centum of the amount by which the net 
estate exceeds $8,000,000 and does not exceed 
$10,000,000; and 

25 per centum of the amount by which the net 
estate exceeds $10,000,000. 

The taxes imposed by this title or by Title II of 
the Revenue Act of 19 16 (as amended by the Act 
entitled "An Act to provide increased revenue to 
defray the expenses of the increased appropriations 
for the Army and Navy and the extensions of forti- 
fications, and for other purposes," approved March 

118 



Sec. 402 

ESTATE TAX 

3, 1917) or by Title IX of the Revenue Act of 
1 9 17, or by Title IV of the Revenue Act of 191 8, 
shall not apply to the transfer of the net estate of 
any decedent w^ho has died or may die from in- 
juries received or disease contracted in line of duty 
while serving in the military or naval forces of the 
United States in the war against the German Gov- 
ernment, or to the transfer of the net estate of any 
citizen of the United States who has died or may 
die from injuries received or disease contracted in 
line of duty while serving in the military or naval 
forces of any country while associated with the 
United States in the prosecution of such war, or 
prior to the entrance therein of the United States, 
and any tax collected upon such transfer shall be 
refunded to the estate of such decedent. 

Sec. 402. That the value of the gross estate of aJte/mfned' 
the decedent shall be determined by including the {^'^^^If^'^"'''^'^^' 
value at the time of his death of all property, real 
or personal, tangible or intangible, wherever sit- 
uated — 

(a) To the extent of the interest therein of the 
decedent at the time of his death which after his 
death is subject to the payment of the charges 
against his estate and the expenses of its administra- 
tion and is subject to distribution as part of his 
estate ; 

(b) To the extent of any interest therein of the 
surviving spouse, existing at the time of the de- 
cedent's death as dower, curtesy, or by virtue of 
a statute creating an estate in lieu of dower or 
curtesy; 

(c) To the extent of any interest therein 'of 
which the decedent has at any time made a trans- 

119 



Sec. 402 



Gross estate 
continued 



Interest of 
joint tenants 



Exceptions 



REVENUE ACT OF 1921 

fet, or with respect to which he has at any time 
created a trust, in contemplation of or intended to 
take effect in possession or enjoyment at or after his 
death (whether such transfer or trust is made or 
created before or after the passage of this Act) , ex- 
cept in case of a bona fide sale for a fair considera- 
tion in money or money's worth. Any transfer of a 
material part of his property in the nature of a final 
disposition or distribution thereof, made by the de- 
cedent within two years prior to his death without 
such a consideration, shall, unless shown to the con- 
trary, be deemed to have been made in contempla- 
tion of death within the meaning of this title; 

(d) To the extent of the interest therein held 
jointly or as tenants in the entirety by the decedent 
and any other person, or deposited in banks or 
other institutions in their joint names and payable 
to either or the survivor, except such part thereof 
as may be shown to have originally belonged to 
such other person and never to have been received 
or acquired by the latter from the decedent for 
less than a fair consideration in money or money's 
worth: Provided, That where such property or 
any part thereof, or part of the consideration with 
which such property was acquired, is shown to have 
been at any time acquired by such other person from 
the decedent for less than a fair consideration in 
money or money's worth, there shall be excepted 
only such part of the value of such property as is 
proportionate to the consideration furnished by such 
other person : Provided further, That where any 
property has been acquired by gift, bequest, devise, 
or inheritance, as a tenancy in the entirety by the de- 
cedent and spouse, or where so acquired by the de- 
cedent and any other person as joint tenants and their 



1 20 



Sec. 403 
ESTATE TAX 

interests are not otherwise specified or fixed by law, 
then to the extent of one-half of the value thereof ; 

(e) To the extent of any property passing under ''^"p*/^? """"^ 
a general power of appointment exercised by the appointment 
decedent (i) by will, or (2) by deed executed in 
contemplation of, or intended to take effect in 
possession or enjoyment at or after, his death, ex- 
cept in case of a bona fide sale for a fair consider- 
ation in money or money's worth ; and 

(f) To the extent of the amount receivable by Amount received 

^' «<••« ^^ insurance 

the executor as insurance under policies taken out 
by the decedent upon his own life; and to the 
extent of the excess over $40,000 of the amount re- 
ceivable by all other beneficiaries as insurance un- 
der policies taken out by the decedent upon his 
own life. 

Sec. 403. That for the purpose of the tax the ^;^,i'^t^li 
value of the net estate shall be determined — 

(a) In the case of a resident, by deducting from °'f^ent°de«dent 
the value of the gross estate — 

( I ) Such amounts for funeral expenses, admin- Expen... 
istration expenses, claims against the estate, un- 
paid mortgages upon, or any indebtedness in re- 
spect to, property (except, in the case of a resident 
decedent, where such property is not situated in 
the United States), losses incurred during the set- 
tlement of the estate arising from fires, storms, 
shipwreck, or other casualty, or from theft, when 
such losses are not compensated for by insurance or 
otherwise, and such amounts reasonably required 
-and actually expended for the support during the 
settlement of the estate of those dependent upon 

121 



Sec. 403 



Property taxed in 
previous estate of 
decedent dying 
within the previous 
five years 



Gifts, bequests 
etc., to the U. S. 
or any political 
subdivision for 
public purposes 
or to charitable 
organizations, etc. 



REVENUE ACT OF 1921 

the decedent, as are allowed by the laws of the 
jurisdiction, whether within or without the United 
States, under which the estate is being administer- 
ed, but not including any income taxes upon in- 
come received after the death of the decedent, or 
any estate, succession, legacy, or inheritance taxes ; 

(2) An amount equal to the value of any prop- 
erty forming a part of the gross estate situated in 
the United States of any person who died within 
five years prior to the death of the decedent where 
such property can be identified as having been re- 
ceived by the decedent from such prior decedent 
by gift, bequest, devise, or inheritance, or which 
can be identified as having been acquired in ex- 
change for property so received : Provided, That 
this deduction shall be allowed only where an 
estate tax under this or any prior Act of Congress 
was paid by or on behalf of the estate of such prior 
decedent, and only in the amount of the value 
placed by the Commissioner on such property in 
determining the value of the gross estate of such 
prior decedent, and only to the extent that the value 
of such property is included in the decedent's gross 
estate and not deducted under paragraphs ( i ) or 
(3) of subdivision (a) of this section. This de- 
duction shall be made in case of the estates of all 
decedents who have died since September 8, 1916; 

(3) The amount of all bequests, legacies, de- 
vises, or transfers, except bona fide sales for a fair 
consideration in money or money's worth, in con- 
templation of or intended to take effect in posses- 
sion or enjoyment at or after the decedent's death, 
to or for the use of the United States, any State, 
Territory, any political subdivision thereof, or the 
District of Columbia, for exclusively public pur- 

122 



Sec. 403 



ESTATE TAX 



poses, or to or for the use of any corporation or- 
ganized and operated exclusively for religious, 
charitable, scientific, literary, or educational pur- 
poses, including the encouragement of art and the 
prevention of cruelty to children or animals, no 
part of the net earnings of which inures to the 
benefit of any private stockholder or individual, or 
to a trustee or trustees exclusively for such re- 
ligious, charitable, scientific, literary, or education- 
al purposes. This deduction shall be made in case 
of the estates of all decedents who have died since 
December 31, 1917; and 

(4) An exemption of $50,000; $so,ooo exempt 

(b) In the case of a nonresident, by deducting Nonresident 

<•! 1 /-I /-I- 1-1 decedent net 

from the value of that part of his gross estate which taxable e»fate 

*^ O determined 

at the time of his death is situated in the United »"<* deductions 
States — 

( 1 ) That proportion of the deductions specified f^^^^^ned 
in paragraph (i) of subdivision (a) of this section 
which the value of such part bears to the value of 

his entire gross estate, wherever situated, but in no 
case shall the amount so deducted exceed 10 per 
centum of the value of that part of his gross estate 
which at the time of his death is situated in the 
United States; 

(2) An amount equal to the value of any prop- Property upon 

\ ' ^ , , . whxch a tax has 

erty forming a part of the gross estate situated in ^^^^S^i'Jl{^[^ 
the United States of any person who died within five years, 
five years prior to the death of the decedent where 
such property can be identified as having been 
received by the decedent from such prior decedent 
by gift, bequest, devise, or inheritance, or which 
can be identified as having been acquired in ex- 
change for property so received: Provided, That 

123 



Sec. 403 



REVENUE ACT OF 1921 

this deduction shall be allowed only where an 
estate tax under this or any prior Act of Congress 
was paid by or on behalf of the estate of such prior 
decedent, and only in the amount of the value 
placed by the Commissioner on such property in 
determining the value of the gross estate of such 
prior decedent, and only to the extent that the value 
of such property is included in that part of the 
decedent's gross estate which at the time of his 
death is situated in the United States and not de- 
ducted under paragraphs (i) or (3) of subdivision 
(b) of this section. This deduction shall be made 
in case of the estates of all decedents who have died 
since September 8, 1916; and 

devi^rforfatbiic (3) The amount of all bequests, legacies, de- 

purp^sfetc. vises, or transfers, except bona fide sales for a fair 

consideration, in money or money's worth, in con- 
templation of or intended to take effect in posses- 
sion or enjoyment at or after the decedent's death, 
to or for the use of the United States, any State, 
Territory, any political subdivision thereof, or the 
District of Columbia, for exclusively public pur- 
poses, or to or for the use of any domestic corpora- 
tion organized and operated exclusively for re- 
ligious, charitable, scientific, literary, or education- 
al purposes, including the encouragement of art 
and the prevention of cruelty to children or an- 
imals, no part of the net earnings of which inures 
to the benefit of any private stockholder or individ- 
ual, or to a trustee or trustees exclusively for such 
religious, charitable, scientific, literary, or educa- 
tional purposes within the United States. This 
deduction shall be made in case of the estates of 
all decedents who have died since December 31, 
1917. 

124 



Sec. 403 



ESTATE TAX 



No deduction shall be allowed in tne case of a no deduction, for 

.J - - • nonresident unless 

nonresident unless the executor includes in the re- executor aus notice 

and return 

turn required to be filed under section 404 the 
value at the time of his death of that part of the 
gross estate of the nonresident not situated in the 
United States. 

For the purpose of this title stock in a domestic stock of dome.uc 

■ 1 11111 -1 1 corporations 

corporation owned and held by a nonresident de- owned by 

t J nonresident 

cedent shall be deemed property within the United decedent 
States, and any property of which the decedent has 
made a transfer or with respect to which he has 
created a trust, within the meaning of subdivision 
(c) of section 402, shall be deemed to be situated 
in the United States, if so situated either at the 
time of the transfer or the creation of the trust, or 
at the time of the decedent's death. 

The amount receivable as insurance upon the life jepMitTrn'^lik. 
of a nonresident decedent, and any moneys de- Sl^dent"'''"' 
posited with any person carrying on the banking 
business, by or for a nonresident decedent who was 
not engaged in business in the United States at the 
time of his death, shall not, for the purpose of this 
title, be deemed property within the United States. 

Missionaries duly commissioned and serving Missionaries 

■J C3 presumed to 

under boards of foreign missions of the various re- te resident, 
ligious denominations in the United States, dying 
while in the foreign missionary service of such 
boards, shall not, by reason merely of their in- 
tention to permanently remain in such foreign ser- 
vice, be deemed nonresidents of the United States, 
but shall be presumed to be residents of the State, 
the District of Columbia, or the Territories of 
Alaska or Hawaii wherein they respectively re- 
sided at the time of their commission and their 
departure for such foreign service. 

125 



Sec. 404 



Rede ter mi n ations 
of tax paid and 
refund of excess 



Executor to srive 
notice to collector 
within 60 days 



Return by 
executor 



Return when gross 
estate exceeds 
$50,000 for resident 



For every 
nonresident who 
has property in U. S. 



Commissioner to 
assess the tax 



REVENUE ACT OF 1921 

In the case of any estate in respect to which the 
tax has been paid, if necessary to allow the benefit 
of the deduction under paragraphs (2) and (3) of 
subdivision (a) or (b) the tax shall be redeter- 
mined and any excess of tax paid shall be refunded 
to the executor. 

Sec. 404. That the executor, within two months 
after the decedent's death, or within a like period 
after qualifying as such, shall give written notice 
thereof to the collector. The executor shall also, 
at such times and in such manner as may be re- 
quired by regulations made pursuant to law, file 
with the collector a return under oath in duplicate, 
setting forth (a) the value of the gross estate of 
the decedent at the time of his death, or, in case 
of a nonresident, of that part of his gross estate sit- 
uated in the United States; (b) the deductions 
allowed under section 403; (c) the value of the 
net estate of the decedent as defined in section 403 ; 
and (d) the tax paid or payable thereon; or such 
part of such information as may at the time be 
ascertainable and such supplemental data as may 
be necessary to establish the correct tax. 

Return shall be made in all cases where the 
gross estate at the death of the decedent exceeds 
$50,000, and in the case of the estate of every non- 
resident any part of whose gross estate is situated in 
the United States. If the executor is unable to make 
a complete return as to any part of the gross estate 
of the decedent, he shall include in his return a de- 
scription of such part and the name of every person 
holding a legal or beneficial interest therein, and 
upon notice from the collector such person shall in 
like manner make a return as to such part of the 
gross estate. The Commissioner shall make all 

126 



Sees. 405-407 



ESTATE TAX 



return 
issioner 
assess the tax 



assessments of the tax under the authority of exist- 
ing administrative special and general provisions 
of law relating to the assessment and collection of 
taxes. 

Sec. 405. That if no administration is granted HedVo'iucTor' 
upon the estate of a decedent, or if no return is filed ^7c"mmi; 
as provided in section 404, or if a return contains a 
false or incorrect statement of a material fact, the 
collector or deputy collector shall make a return 
and the Commissioner shall assess the tax thereon. 

Sec. 406. That the tax shall be due and payable X" <*"• 

' ■* -' Commissioner may 

one year after the decedent's death; but in any s>-ant extension 
case where the Commissioner finds that payment 
of the tax within such period would impose undue 
hardship upon the estate, he may grant an exten- 
sion or extensions of time for payment not to ex- 
ceed three years from the due date. 

The executor shall pay the tax to the collector E«cutor to pay tax 

r J interest on unpaid 

or deputy collector, and to such portion of the tax, '" 
not paid within one year and six months after the 
decedent's death, interest at the rate of 6 per 
centum per annum from the expiration of one year 
after such death shall be added as part of the tax 
irrespective of any extension or extensions of time 
that may have been granted for the payment of the 
tax, or any portion thereof. 

Sec. 407. That where the amount of tax shown fenaity for 

T^ ' failure to 

upon a return made in good faith has been fully ^^5'/^",^^ 
paid, or time for payment has been extended, as 
provided in section 406, beyond one year and six 
months after the decedent's death, and an addi- 
tional amount of tax is, after the expiration of 
such period of one year and six months, found to be 
due, then such additional amount shall be paid 

127 



Sec. 407 



Collector to issue 
duplicate receipt 



Executor may 
obtain relief from 
personal liability 



Lien for tax 
on gross estate 



REVENUE ACT OF 1921 

upon notice and demand by the collector, and if it 
remains unpaid for one month after such notice 
and demand there shall be added as part of the tax 
interest on such additional amount at the rate of 
lo per centuni per annum from the expiration of 
such period until paid, and such additional tax 
and interest shall, until paid, be and remain a lien 
upon the entire gross estate. 

The collector shall grant to the person paying 
the tax duplicate receipts, either of which shall 
be sufficient evidence of such payment, and shall 
entitle the executor to be credited and allowed the 
amount thereof by any court having jurisdiction to 
audit or settle his accounts. 

If the executor files a complete return and makes 
written application to the Commissioner for de- 
termination of the amount of the tax and discharge 
from personal liability therefor, the Commissioner, 
as soon as possible and in any event within one 
year after receipt of such application, shall notify 
the executor of the amount of the tax, and upon 
payment thereof the executor shall be discharged 
from personal liability for any additional tax there- 
after found to be due, and shall be entitled to re- 
ceive a receipt or writing showing such discharge: 
Provided, however, That such discharge shall not 
operate to release the gross estate from the lien of 
any additional tax that may thereafter be found to 
be due while the title to such gross estate remains 
in the heirs, devisees, or distributees thereof; but 
no part of such gross estate shall be subject to such 
lien or to any claim or demand for any such tax if 
the title thereto has passed to a bona fide purchaser 
for value. 

128 



Sec. 408 
ESTATE TAX 

Sec. 408. That if the tax herein imposed is not fntrc^-^Tment 
paid on or before the due date thereof the collector 
shall, upon instruction from the Commissioner, 
proceed to collect the tax under the provisions of 
general law, or commence appropriate proceedings 
in any court of the United States, in the name of 
the United States, to subject the property of the 
decedent to be sold under the judgment or decree of 
the court. From the proceeds of such sale the 
amount of the tax, together with the costs and ex- 
penses of every description to be allowed by the 
court, shall be first paid, and the balance shall be 
deposited according to the order of the court, to be 
paid under its direction to the person entitled 
thereto. 

If the tax or any part thereof is paid by, or col- ^^if^^^^"^^^ 
lected out of that part of the estate passing to or 
in the possession of, any person other than the ex- 
ecutor in his capacity as such, such person shall be 
entitled to reimbursement out of any part of the 
estate still undistributed or by a just and equitable 
contribution by the persons whose interest in the 
estate of the decedent would have been reduced 
if the tax had been paid before the distribution of 
the estate or whose interest is subject to equal or 
prior liability for the payment of taxes, debts, or 
other charges against the estate, it being the pur- 
pose and intent of this title that so far as is practic- 
able and unless otherwise directed by the will of 
the decedent the tax shall be paid out of the estate 
before its distribution. If any part of the gross ?„''.";.'^=„':7tob..r 
estate consists of proceeds of policies of insurance 'hareoftax 
upon the life of the decedent receivable by a bene- 
ficiary other than the executor, the executor shall 
be entitled to recover from such beneficiary such 

129 



Sec. 409 



Estate tax a lien for 
10 years 



Transfers or trusts 
in contemplation 
of death 



REVENUE ACT OF 1921 

portion of the total tax paid as the proceeds, in ex- 
cess of $40,000, of such policies bear to the net 
estate. If there is more than one such beneficiary 
the executor shall be entitled to recover from such 
beneficiaries in the same ratio. 

Sec. 409. That unless the tax is sooner paid in 
full, it shall be a lien for ten years upon the gross 
estate of the decedent, except that such part of the 
gross estate as is used for the payment of charges 
against the estate and expenses of its administra- 
tion, allowed by any court having jurisdiction 
thereof, shall be divested of such lien. If the Com- 
missioner is satisfied that the tax liability of an 
estate has been fully discharged or provided for, he 
may, under regulations prescribed by him with the 
approval of the Secretary, issue his certificate re- 
leasing any or all property of such estate from the 
lien herein imposed. 

If (a) the decedent makes a transfer of, or cre- 
ates a trust with respect to, any property in con- 
templation of or intended to take effect in posses- 
sion or enjoyment at or after his death (except in 
the case of a bona fide sale for a fair consideration 
in money or money's worth) or (b) if insurance 
passes under a contract executed by the decedent 
in favor of a specific beneficiary, and if in either 
case the tax in respect thereto is not paid when due, 
then the transferee, trustee, or beneficiary shall be 
personally liable for such tax, and such property, 
to the extent of the decedent's interest therein at the 
time of such transfer, or to the extent of such bene- 
ficiary's interest under such contract of insurance, 
shall be subject to a like lien equal to the amount 
of such tax. Any part of such property sold by 
such transferee or trustee to a bona fide purchaser 

130 



Sees. 410, 411 

INCOME TAX— ESTATE TAX 

for a fair consideration in money or money's worth 
shall be divested of the lien and a like lien shall 
then attach to all the property of such transferee 
or trustee, except any part sold to a bona fide pur- 
chaser for a fair consideration in money or money's 
worth. 

Sec. 410. That whoever knowingly makes any Penalty for faUe 
false statement in any notice or return required to 
be filed under this title shall be liable to a penalty 
of not exceeding $5,000, or imprisonment not ex- 
ceeding one year, or both. 

Whoever fails to comply with any duty imposed other penalties 
upon him by section 404, or, having in his posses- 
sion or control any record, file, or paper, containing 
or supposed to contain any information concerning 
the estate of the decedent, or, having in his posses- 
sion or control any property comprised in the gross 
estate of the decedent, fails to exhibit the same 
upon request to the Commissioner or any collector 
or law officer of the United States, or his duly 
authorized deputy or agent, who desires to examine 
the same in the performance of his duties under 
this title, shall be liable to a penalty of not exceed- 
ing $500, to be recovered, with costs of suit, in a 
civil action in the name of the United States. 

Sec. 411. (a) That the term "resident" as used emzenT/u.'sf'"'^'" 
in this title includes a citizen of the United States "or'chint'"^' 
with respect to whose property any probate or ad- 
ministration proceedings are had in the United 
States Court for China. Where no part of the 
gross estate of such decedent is situated in the 
United States at the time of his death, the total 
amount of tax due under this title shall be paid to 
or collected by th,e clerk of such court, but where 
any part of the gross estate of such decedent is sit- 

131 



Sec. 500 

REVENUE ACT OF 1921 

uated in the United States at the time of his death, 
the tax due under this title shall be paid to or col- 
lected by the collector of the district in which is 
situated the part of the gross estate in the United 
States, or, if such part is situated in more than one 
district, then the collector of such district as may 
be designated by the Commissioner. 

clurttachik. (b) For the purpose of this section the clerk of 

?h.°td£*^Ict" the United States Court for China shall be a col- 

lector for the territorial jurisdiction of such court, 
and taxes shall be collected by and paid to him in 
the same manner and subject to the same provisions 
of law, including penalties, as the taxes collected 
by and paid to a collector in the United States. 



June 4, 1920, 
in part 



fu^'IVwoV "' (c) The proviso in the Act entitled "An Act 

making appropriation for the Diplomatic )and 
Consular Service for the fiscal year ending June 
30, 1 92 1," approved June 4, 1920, which reads as 
follows: "Provided, That in probate and admin- 
istration proceedings there shall be collected by 
said clerk, before entering the order of final distrib- 
ution, to be paid into the Treasury of the United 
States, the same inheritance taxes from time to 
time collected under the laws enacted by the Cong- 
ress of the United States from the estates of de- 
cedents residing within the territorial jurisdiction 
of the United States," is hereby repealed. 

Title V.— Tax on Telegraph and Telephone 
Messages. 

Sec. 500. That from and after January i, 1922, 
there shall be levied, assessed, collected, and paid, 
in lieu of the taxes imposed by section 500 of the 
Revenue Act of 191 8 — 

132 



Sec. 500 
TAX ON TELEGRAPH AND TELEPHONE MESSAGES 

(a) In the case of each telegraph, telephone, J^^l"^;^^'^"'""''^' 
cable, or radio, dispatch, message, or conversation, "''^ " "^''° 
which originates on or after such date within the 

United States, and for the transmission of which 
the charge is more than 14 cents and not more than 
50 cents, a tax of 5 cents ; and if the charge is more 
than 50 cents, a tax of 10 cents : Provided, That only 
one payment of such tax shall be required, not- 
withstanding the lines or stations of one or more 
persons are used for the transmission of such dis- 
patch, message, or conversation; and 

(b) A tax equivalent to 10 per centum of the Tax on ie«..d wire, 
amount paid after such date to any telegraph or 
telephone company for any leased wire or talking 

circuit special service furnished after such date. 
This subdivision shall not apply to the amount paid 
for so much of such service as is utilized ( i ) in the 
collection and dissemination of news through the 
public press, or (2) in the conduct, by a common 
carrier or telegraph or telephone company, of its 
business as such; 

(c) No tax shall be imposed under this section Exemption, 
upon any payment received for services rendered 

to the United States or to any State or Territory or 
the District of Columbia. The right to exemption 
under this subdivision shall be evidenced in such 
manner as the Commissioner, with the approval 
of the Secretary, may by regulation prescribe. 

(d) Under regulations prescribed by the Com- ^=i{;f,"/.t'Jif.:-id 
missioner with the approval of the Secretary, re- "='"'*• 

fund shall be made of the proportionate part of 
the tax collected under subdivision (c) or (d) of 
section 500 of the Revenue Act of 191 8 on tickets 
or mileage books purchased and only partially 
used before January i, 1922. 

133 



Sees. 501, 502, 600 



Who pays tax 



Person receiving 
payment to collect 
and pay tax 
to collector 



Credit for refund 
of tax paid 



Information 
contained 
in returns 



Penalties 



Distilled spirits, 

non-beverage 

tax 



REVENUE ACT OF 1921 

Sec. 501. That the taxes imposed by section 
500 shall be paid by the person paying for the 
services or facilities rendered. 

Sec. 502. (a) That each person receiving any 
payments referred to in section 500 shall collect 
the amount of the tax, if any, imposed by such 
section from the person making such payments, 
and shall make monthly returns under oath, in 
duplicate, and pay the taxes so collected to the 
collector of the district in which the principal 
office or place of business is located. 

(b) Any person making a refund of any pay- 
ment upon which tax is collected under this section 
may repay therewith the amount of the tax collected 
on such payment; and the amount so repaid may 
be credited against amounts included in any sub- 
sequent monthly return. 

(c) The returns required under this section shall 
contain such information, and be made at such 
times and in such manner, as the Commissioner, 
with the approval of the Secretary, may, by reg- 
ulation prescribe. 

(d) The tax shall, without assessment by the 
Commissioner or notice from the collector, be due 
and payable to the collector at the time so fixed 
for filing the return. If the tax is not paid when 
due, there shall be added as part of the tax a pen- 
alty of 5 per centum, together with interest at the 
rate of i per centum for each full month, from the 
time when the tax became due. 

Title VI.— Tax on Beverages and Constituent 
Parts Thereof. 

Sec. 600. That subdivision (a) of section 600 
of the Revenue Act of 191 8 is amended by striking 



134 



Sees. 601, 602 
TAX ON BEVERAGES 

out the period at the end thereof and inserting a 
colon and the following: "Provided, That on all 
distilled spirits on which tax is paid at the non- 
beverage rate of $2.20 per proof gallon and which 
are diverted to beverage purposes or for use in 
the manufacture or production of any article used 
or intended for use as a beverage, there shall be 
levied and collected an additional tax of $4.20 on Beverag. 
each proof gallon, and a proportionate tax at a 
like rate on all fractional parts of such proof gal- 
lon to be paid by the person responsible for such 
diversion." 

Sec. 601. That section 605 of the Revenue Act ^'iTcohoYnoV'™ 
of 191 8 is amended by adding at the end thereof "^rtmcation,- 
the following: "The process of extraction of water !*«*« "Lt of isis 
from high proof spirits for the production of ab- "'"™''"* 
solute alcohol shall not be deemed to be rectifica- 
tion within the meaning of section 3244 of the Re- 
vised Statutes, and absolute alcohol shall not be 
subject to the tax imposed by this section, but the 
production of such absolute alcohol shall be under 
such regulations as the Commissioner, with the 
approval of the Secretary, may prescribe." 

Sec. 602. That from and after January i, 1922, 
there shall be levied, assessed, collected, and paid, 
in lieu of the taxes imposed by sections 628 and 
630 of the Revenue Act of 191 8 — 

(a) Upon all beverages derived wholly or in cereai beverage, 
part from cereals or substitutes therefor, contain- 
ing less than one-half of i per centum of alcohol by 

volume, sold by the manufacturer, producer, or 
importer, a tax of 2 cents per gallon. 

(b) Upon all unfermented fruit juices, in nat- ll^^\l>^X 
ural or slightly concentrated form, or such fruit 

135 



juices 
: drinks taj^ 



Sec. 602 



Still drinks 

tax 



Mineral water in 

containers 

tax 



Sirups 
tax 



REVENUE ACT OF 1921 

juices to which sugar has been added (as distin- 
guished from finished or fountain sirups), i-n- 
tended for consumption as beverages with the ad- 
dition of water or water and sugar, and upon all 
imitations of any such fruit juices, and upon all 
carbonated beverages, commonly known 'as soft 
drinks (except those described in subdivision (a) ), 
manufactured, compounded, or mixed by the use 
of concentrate, essence, or extract, instead of a 
finished or fountain sirup, sold by the manufact- 
urer, producer or importer, a tax of 2 cents per 
gallon. 

(c) Upon all still drinks, containing less than 
one-half of i per centum of alcohol by volume, 
intended for consumption as beverages in the form 
in which sold (except natural or artificial min- 
eral and table water and imitations thereof, and 
pure apple cider), sold by the manufacturer, pro- 
ducer or importer, a tax of 2 cents per gallon. 

(d) Upon all natural or artificial mineral 
waters or table waters, whether carbonated or not, 
and all imitations thereof, sold by the producer, 
bottler, or importer thereof, in bottles or other 
closed containers, at over I2j4 cents per gallon, a 
tax of 2 cents per gallon. 

(e) Upon all finished or fountain sirups of the 
kinds used in manufacturing, compounding, or 
mixing drinks commonly known as soft drinks, 
sold by the manufacturer, producer, or importer, a 
tax of 9 cents per gallon; except that in the case of 
any such sirups intended to be used in the manu- 
facture of carbonated beverages sold in bottles or 
other closed containers the rate shall be 5 cents per 
gallon. Where any person conducting a soda 
fountain, ice cream parlor, or other similar place 

136 



Sec. 603 



TAX ON BEVERAGES 

of business manufactures any sirups of the kinds 
described in this subdivision, there shall be levied, 
assessed, collected, and paid on each gallon manu- 
factured, and used in the preparation of soft drinks 
a tax of 9 cents per gallon; and where any person 
manufacturing carbonated beverages manufactures 
and uses any such sirups in the manufacture of 
carbonated beverages sold in bottles or other closed 
containers there shall be levied, assessed, collected, 
and paid on each gallon of such sirups a tax of 5 
cents per gallon. The taxes imposed by this sub- 
division shall not apply to finished or fountain 
sirups sold for use in the manufacture of a bever- 
age subject to tax under subdivision (a) or (c). 

(f ) Upon all carbonic acid gas sold by the man- carbonic acw »»» 
ufacturer, producer, or importer to a manufact- 
urer of any carbonated beverages, or to any person 
conducting a soda fountain, ice cream parlor, or 
other similar place of business, and upon all car- 
bonic acid gas used by the manufacturer, pro- 
ducer, or importer thereof in the preparation of 
soft drinks, a tax of 4 cents per pound. 

Sec. 60'?. (a) That each manufacturer, pro- Returns by 

y , ' ■*■ manufacturer, 

ducer, or importer of any of the articles enumer- f^po'Jt""'' 
ated in section 602 and each person who sells car- 
bonic acid gas to a manufacturer of carbonated 
beverages or to a person conducting a soda foun- 
tain, ice cream parlor, or other similar place of 
business, shall make monthly returns under oath in 
duplicate and pay the tax imposed in respect to 
the articles enumerated in section 602 to the col- 
lector for the district in which is located the 
principal place of business. Such returns shall 
contain such information and be made at such 
times and in such manner as the Commissioner, 

137 



Sec. 700 



Certificate of 
registry to be 
posted 



REVENUE ACT OF 1921 

with the approval of the Secretary, may by regula- 
tions prescribe. The tax shall, without assessment 
by the Commissioner or notice from the collector, 
be due and payable to the collector at the time so 
fixed for filing the return. If the tax is not paid 
when due, there shall be added as part of the tax 
a penalty of 5 per centum, together with interest 
at the rate of i per centum for each full month 
from the time when the tax becamfe due. 

(b) Each person required to pay any tax im- 
posed by section 602 shall procure and keep posted 
a certificate of registry in accordance with regu- 
lations to be prescribed by the Commissioner, with 
the approval of the Secretary. Any person who 
fails to register or keep posted any certificate of 
registry in accordance with such regulations, shall 
be subject to a penalty of not more than $1,000 for 
each such offense. 



Tax on 

manufacturer or 
importer of cigars 
or cigarettes 



Cigars 



Title VII. — Tax on Cigars, Tobacco, and 
Manufactures Thereof. 

Sec. 700. (a) That upon cigars and cigarettes 
manufactured in or imported into the United 
States, and hereafter sold by the manufacturer or 
importer, or removed for consumption or sale, 
there shall be levied, collected, and paid under the 
provisions of existing law, in lieu of the internal- 
revenue taxes now imposed thereon by section 700 
of the Revenue Act of 191 8, the following taxes, to 
be paid by the manufacturer or importer thereof — 

On cigars of all descriptions made of tobacco, 
or any substitute therefor, and weighing not more 
than three pounds per thousand, $1.50 per thous- 
and; 

138 



Sec. 700 
TAX ON CIGARS AND TOBACCO 

On cigars made of tobacco, or any substitute 
therefor, and weighing more than three pounds 
per* thousand, if manufactured or imported to 
retail at not more than 5 cents each, $4 per thou- 
sand; 

If manufactured or imported to retail at more 
than 5 cents each and not more than 8 cents each, 
$6 per thousand; 

If manufactured or imported to retail at more 
than 8 cents each and not more than 15 cents each, 
$9 per thousand; 

If manufactured or imported to retail at more 
than 15 cents each and not more than 20 cents each, 
$12 per thousand; 

If manufactured or imported to retail at more 
than 20 cents each, $15 per thousand ; 

On cigarettes made of tobacco or any substitute cigarett.. 
therefor, and weighing not more than three pounds 
per thousand, $3 per thousand; 

Weighing more than three pounds per thousand, 
$7.20 per thousand. 

(b) Whenever in this section reference is made when retail prio 
to cigars manufactured or imported to retail at 

not over a certain price each, then in determining 
the tax to be paid regard shall be had to the ordin- 
ary retail price of a single cigar. 

(c) The Commissioner may, by regulation, re- Labeu and stamp, 
quire the manufacturer or importer to affix to each 

box, package, or container a conspicuous label in- 
dicating the clause of this section under which the 
cigars therein contained have been tax-paid, which 
must correspond with the tax-paid stamp on such 
box or container. 

139 



Sec. 701 



Stamps to be 
affixed 



Tax on tobacco 
and snuff 



Regulations for 
packing tobacco 
and snuff 



REVENUE ACT OF 1921 

(d) Every manufacturer of cigarettes (includ- 
ing small cigars weighing not more than three 
pounds per thousand) shall put up all the cigar- 
ettes and such small cigars that he manufactures 
or has manufactured for him, and sells or removes 
for consumption or sale, in packages or parcels 
containing five, eight, ten, twelve, fifteen, sixteen, 
twenty, twenty-four, forty, fifty, eighty, or one 
hundred cigarettes each, and shall securely affix to 
each of such packages or parcels a suitable stamp 
denoting the tax thereon and shall properly cancel 
the same prior to such sale or removal for con- 
sumption or sale under such regulations as the 
Commissioner, with the approval of the Secretary, 
shall prescribe; and all cigarettes imported from a 
foreign country shall be packed, stamped, and 
the stamps cancelled in a like manner, in addition 
to the import stamp indicating inspection of the 
customhouse before they are withdrawn therefrom. 

Sec. 701. (a) That upon all tobacco and snuff 
manufactured in or imported into the United 
States, and hereafter sold by the manufacturer or 
importer, or removed for consumption or sale, 
there shall be levied, collected, and paid, in lieu 
of the internal-revenue taxes now imposed thereon 
by section 701 of the Revenue Act of 191 8, a tax 
of 18 cents per pound, to be paid by the manufact- 
urer or importer thereof. 

(b) Section 3362 of the Revised Statutes, as 
amended by section 701 of the Revenue Act of 
1918, is re-enacted without change, as follows: 

"Sec. 3362. All manufactured tobacco -shall be 
put up and prepared by the manufacturer for 
sale, or removal for sale or consumption, in pack- 

I4» 



Sec. 701 

TAX ON CIGARS AND TOBACCO 

ages of the following description and in no other ^=/pi^k^"/ 
manner : -continued 

"All smoking tobacco, snuff, fine-cut chewing 
tobacco, all cut and granulated tobacco, all shorts, 
the refuse of fine-cut chewing, which has passed 
through a riddle of thirty-six meshes to the square 
inch, and all refuse scraps, clippings, cuttings, and 
sweepings of tobacco, and all other kinds of to- 
bacco not otherwise provided for, in packages con- 
taining one-eighth of any ounce, three-eighths of 
an ounce, and further packages with a difference 
between each package and the one next smaller of 
one-eighth of an ounce up to and including two 
ounces, and further packages with a difference 
between each package and the one next smaller of 
one-fourth of an ounce up to and including four 
ounces, and packages of five ounces, six ounces, 
seven ounces, eight ounces, ten ounces, twelve 
ounces, fourteen ounces and sixteen ounces : Pro- 
vided, That snuff may, at the option of the manu- 
facturer, be put up in bladders and in jars contain- 
ing not exceeding twenty pounds. 

"All cavendish, plug, and twist tobacco in 
wooden packages not exceeding two hundred 
pounds net weight. 

"And every such wooden package shall have 
printed or marked thereon the manufacturer's 
name and place of manufacture, the registered 
number of the manufactory, and the gross weight, 
the tare, and the net weight of the tobacco in each 
package: Provided, That these limitations and Exports ex«pted 
descriptions of packages shall not apply to to- 
bacco and snuff transported in bond for exporta- 
tion and actually exported : And provided further, 

141 



Sec. 703 



(No section 702 
in the Act) 

Tax on cigarette 
papers and tubes 



Bond required of 
manufacturer of 
cigarette* 



REVENUE ACT OF 1921 

That perique tobacco, snuff flour, fine-cut shorts, 
the refuse of fine-cut chewing tobacco, refuse 
scraps, clippings, cuttings, and sweepings of to- 
bacco, may be sold in bulk as material, and with- 
out the payment of tax, by one manufacturer di- 
rectly to another manufacturer, or for export, 
under such restrictions, rules and regulations as 
the Commissioner of Internal- Revenue may pre- 
scribe : And provided further, That wood, metal, 
paper, or other materials may be used separately 
or in combination for packing tobacco, snuff, and 
cigars, under such regulations as the Commissioner 
of Internal Revenue may establish." 

Sec. 703. That there shall be levied, collected, 
and paid, in lieu of the taxes imposed by section 
703 of the Revenue Act of 191 8, upon cigarette 
paper made up into packages, books, sets, or tubes, 
made up in or imported into the United States and 
hereafter sold by the manufacturer or importer to 
any person (other than to a manufacturer of cigar- 
ettes for use by him in the manufacture of cigar- 
ettes) the following taxes, to be paid by the manu- 
facturer or importer: On each package, book, or 
set, containing more than twenty-five but not more 
than fifty papers, ^ cent; containing more than 
fifty but not more than one hundred papers, i cent; 
containing more than one hundred papers, ^ cent 
for each fifty papers or fractional part thereof; 
and upon tubes, i cent for each fifty tubes or frac- 
tional part thereof. 

Every manufacturer of cigarettes purchasing any 
cigarette paper made up into tubes (a) shall give 
bond in an amount and with sureties satisfactory to 
the Commissioner that he will use such tubes in 
the manufacture of cigarettes or pay thereon a tax 



142 



Sec. 704 
TAX ON CIGARS AND TOBACCO 

equivalent to the tax imposed by this section, and 
(b) shall keep such records and render under oath 
such returns as the Commissioner finds necessary to 
show the disposition of all tubes purchased or im- 
ported by such manufacturer of cigarettes. 

Sec. 704. That section 3360 of the Revised .^r"""™""" 
Statutes, as amended by section 704 of the Revenue 
Act of 19 1 8, is re-enacted without change as 
follows : 

"Sec. 3360. (a) Every dealer in leaf tobacco j^fiei^Vnu/" 
shall file with the collector of the district in which *"'"'"'' 
his business is carried on a statement in duplicate, 
subscribed under oath, setting forth the place, and 
if in a city, the street and number of the street, 
where his business is to be carried on, and the 
exact location of each place where leaf tobacco is 
held by him on storage, and, whenever he adds to ^^S^llage"^'"''' 
or discontinues any of his leaf tobacco storage 
places, he shall give immediate notice to the col- 
lector of the district in which he is registered, 

"Every such dealer shall give a bond with surety, J "JI^/"'"'"^ '" 
satisfactory to, and to be approved by, the collector 
of the district, in such penal sum as the collector 
may require, not less than $500; and a new bond 
may be required in the discretion of the collector, 
or under instructions of the Commissioner. 

"Every such dealer shall be assigned a number °^'^^l^' 
by the collector of the district, which number shall 
appear in every inventory, invoice and report 
rendered by the dealer, who shall also obtain cer- 
tificates from the collector of the district setting 
forth the place where his business is carried on 
and the places designated by the dealer as the places 
of storage of his tobacco, which certificates shall STbetoVttd 

143 



Sec. 704 



Dealer to make 
inventory 



Dealer to render 
invoices and keep 
records 



Monthly report of 
dealers in leaf 
tobacco 



REVENUE ACT OF 1921 

be posted conspicuously within the dealer's regis- 
tered place of business, and within each designated 
place of storage. 

"(b) Every dealer in leaf tobacco shall make 
and deliver to the collector of the district a true 
inventory of the quantity of the different kinds of 
tobacco held or owned, and where stored by him, 
on the ist day of January of each year, or at the 
time of commencing and at the time of concluding 
business, if before or after the ist day of January, 
such inventory to be made under oath and rend- 
ered in such form as may be prescribed by the 
Commissioner. 

"Every dealer in leaf tobacco shall render such 
invoices and keep such records as shall be pre- 
scribed by the Commissioner, and shall enter there- 
in, day by day, and upon the same day on which the 
circumstance, thing or act to be recorded is done 
or occurs, an accurate account of the number of 
hogsheads, tierces, cases arid bales, and quantity of 
leaf tobacco contained therein, purchased or re- 
ceived by him, on assignment, consignment, for 
storage, by transfer or otherwise, and of whom pur- 
chased or received, and the number of hogsheads, 
tierces, cases and bales, and the quantity of leaf 
tobacco contained the;;ein, sold by him, with the 
name and residence in each instance of the person 
to whom sold, and if shipped, to whom shipped, 
and to what district; such records shall be kept 
at his place of business at all times and preserved 
for a period of two years, and the same shall be 
open at all hours for the inspection of any internal- 
revenue officer or agent. 

"Every dealer in leaf tobacco on or before the 
tenth day of each month, shall furnish to the col- 



14 + 



Sec. 704 

TAX ON CIGARS AND TOBACCO 

lector of the district a true and complete report of 
all purchases, receipts, sales and shipments of leaf 
tobacco made by him during the month next pre- 
ceding, which report shall be verified and rendered 
in such form as the Commissioner, with the ap- 
proval of the Secretary, shall prescribe. 

"(c) Sales or shipments of leaf tobacco by a saus reguuted 

J I . I ^ - -^ as to quantity 

dealer m leaf tobacco shall be in quantities of not 
less than a hogshead, tierce, case, or bale, except 
loose leaf tobacco comprising the breaks on ware- 
house floors, and except to a duly registered manu- 
facturer of cigars for use in his own manufactory 
exclusively. 

"Dealers in leaf tobacco shall make shipments SbJ"^"' °' '^"' 
of leaf tobacco only to other dealers in leaf tobacco, 
to registered manufacturers of tobacco, snuff, 
cigars or cigarettes, or for export. 

"(d) Upon all leaf tobacco sold, removed or ^^fj""""' *'" '"^ 
shipped by any dealer in leaf tobacco in violation 
of the provisions of subdivision (c), or in respect 
to which no report has been made by such dealer 
in accordance with the provisions of subdivision 
(b), there shall be levied, assessed, collected and 
paid a tax equal to the tax then in force upon 
manufactured tobacco, such tax to be assessed and 
collected in the same manner as the tax on manu- 
factured tobacco. 

"(e) Every dealer in leaf tobacco — 

"(i) who neglects or refuses to furnish the violations 
statement, to give bonds, to keep books, to file in- 
ventory or to render the invoices, returns or reports 
required by the Commissioner, or to notify the 
collector of the district of additions to his places of 
storage; or 

145 



Sec. 800 



Penalties 



Grower of tobacco 
not a "dealer** 
under this section 



Tax on admissions 



Tax on theatre 
tickets^ etc. 



REVENUE ACT OF 1921 

"(2) who ships or delivers leaf tobacco, except 
as herein provided; or 

"(3) who fraudulently omits to account for to- 
bacco purchased, received, sold, or shipped ; shall 
be fined not less than $100 or more than $500, or 
imprisoned not more than one year, or both. 

"(f) For the purposes of this section a farmer or 
grower of tobacco shall not be regarded as a dealer 
in leaf tobacco in respect to the leaf tobacco pro- 
duced by him." 

Title VIII.— Tax on Admissions and Dues. 

Sec. 800. (a) That from and after January i, 
1922, there shall be levied, assessed, collected, and 
paid, in lieu of the taxes imposed by section 800 of 
the Revenue Act of 191 8 — 

(i ) A tax of I cent for each 10 cents or fraction 
thereof of the amount paid for admission to any 
place on or after such date, including admission by 
season ticket or subscription, to be paid by the 
person paying for such admission; but where the 
amount paid for admission is 10 cents or less, no 
tax shall be imposed ; 

(2) Upon tickets or cards of admission to 
theatres, operas, and other places of amusement, 
sold at news stands, hotels, and places other than 
the ticket offices of such theatres, operas, or other 
places of amusement, at not to exceed 50 cents in 
excess of the sum of the established price therefor 
at such ticket offices plus the amount of any tax im- 
posed under paragraph ( i ) , a tax equivalent to 5 
per centum of the amount of such excess; and if 
sold for more than 50 cents in excess of the sum of 

146 



Sec. 800 

TAX ON ADMISSIONS AND DUES 

such established price plus the amount of any tax 
imposed under paragraph ( i ) , a tax equivalent to 
50 per centum of the whole amount of such excess, 
such taxes to be returned and paid, in the manner 
and subject to the penalties and interest provided 
in section 903, by the person selling such tickets ; 

(3) A tax equivalent to 50 per centum of the Jttiti^otr'oiY""" 
amount from which the proprietors, managers, or 
employees of any opera house, theater, or other 

place of amusement sell or dispose of tickets or 
cards of admission in excess of the regular or 
established price or charge therefor, such tax to 
be returned and paid, in the manner and subject 
to the penalties and interest provided in section 
903, by the person selling such tickets; 

(4) In the case of persons having the permanent 7ea''t!ub«riptioM'''' 
use of boxes or seats in an opera house or any place 

of amusement or a lease for the use of such box or 
seat in such opera house or place of amusement (in 
lieu of the tax imposed by paragraph ( i ) ) , a tax 
equivalent to 10 per centum of the amount for 
which a similar box or seat is sold for each per- 
formance or exhibition at which the box or seat is 
used or reserved by or for the lessee or holder, such 
tax to be paid by the lessee or holder; and 

(5) A tax of 1^ cents for each 10 cents or frac- iJiTroo" gi'din,'"" 
tion thereof of the amount paid for admission to "'•""='••"=• 
any public performance for profit at any roof 

garden, cabaret, or other similar entertainment, to 
which the charge for admission is wholly or in part 
included in the price paid for refreshment, service, 
or merchandise; the amount paid for such admis- 
sion to be deemed to be 20 per centum of the 
amount paid for refreshment, service, and mer- 

147 



Sec. 800 



Exemptions from 
admiasion tax 



''Admission*' 
includes 



REVENUE ACT OF 1921 

chandise; such tax to be paid by the person paying 
for such refreshment, service, or merchandise. 

(b) No tax shall be levied under this title in 
respect to ( i ) any admissions all the proceeds of 
which inure (A) exclusively to the benefit of re- 
ligious, educational, or charitable institutions, 
societies, or organizations, any post of the Amer- 
ican Legion or the Women's Auxiliary units there- 
of, societies for the prevention of cruelty to chil- 
dren or animals, or societies or organizations con- 
ducted for the sole purpose of maintaining sym- 
phony orchestras and receiving substantial support 
from voluntary contributions, or of improving any 
city, tow^n, village, or other municipality, or of 
maintaining a cooperative or community center 
moving-picture theatre^ — if no part of the net earn- 
ings thereof inures to the benefit of any private 
stockholder or individual; or (B) exclusively to 
the benefit of persons in the military or naval 
forces of the United States; or (C) exclusively to 
the benefit of persons who have served in such 
forces and are in need; or (2) any admission to 
agricultural fairs if no part of the net earnings 
thereof inures to the benefit of any stockholders or 
members of the association conducting the same, 
or admissions to any exhibit, entertainment, or 
other pay feature conducted by such association as 
part of any such fair, — if the proceeds therefrom 
are used exclusively for the improvement, main- 
tenance and operation of such agricultural fairs. 

(c) The term "admission" as used in this title 
includes seats and tables, reserved or otherwise, 
and other similar accommodations, and the charges 
made therefor. 

148 



Sec. 801 
TAX ON ADMISSIONS AND DUES 

(d) The price (exclusive of the tax to be paid ^Jid'orto beThown 
by the person paying for admission) at which °^^^'J7"'"'°" 
every admission ticket or card is sold shall be con- 
spicuously and indelibly printed, stamped, or 
written on the face or back of that part of the ticket 
which is to be taken up by the management of the 
theater, opera, or other place of amusement, to- 
gether with the name of the vendor if sold other 
than at the ticket office of the theater, opera, or 
other place of amusement. Whoever sells an ad- 
mission ticket or card on which the name of the 
vendor and price is not so printed, stamped, or 
written, or at a price in excess of the price so print- 
ed, stamped, or written thereon, is guilty of a mis- 
demeanor, and upon conviction thereof shall be 
fined not more than $ioo. 

Sec. 8oi. That from and after January i, 1022, Taxondue«or 

•^ J > y 1 membership fees 

there shall be levied, assessed, collected, and paid, 
in lieu of the taxes imposed by section 801 of the 
Revenue Act of 191 8, a tax equivalent to 10 per 
centum of any amount paid on or after such date, 
for any period after such date, (a) as dues or mem- 
bership fees (where the dues or fees of an active 
resident annual member are in excess of $10 per 
year) to any social, athletic, or sporting club or 
organization; or (b) as initation fees to such a club 
or organization, if such fees amount to more than 
$10, or if the dues or membership fees (not includ- 
ing initiation fees) of an active resident annual 
member are in excess of $10 per year; such taxes to 
be paid by the person paying such dues or fees: 
Provided, That there shall be exempted from the Exemptions 
provisions of this section all amounts paid as dues 
or fees to a fraternal society, order, or association, 
operating under the lodge system. In the case of 

149 



Sees. 802, 900 



Collection and 
return of tax on 
admissions and 
dues 



REVENUE ACT OF 1921 

life memberships a life member shall pay annually, 
at the time for the payment of dues by active resi- 
dent annual members, a tax equivalent to the tax 
upon the amount paid by such a member, but shall 
pay no tax upon the amount paid for life member- 
ship. 

Sec. 8o2. That every person receiving any pay- 
ments for such admission, dues, or fees, shall col- 
lect the amount of the tax imposed by section 8oo 
or 8or from the person making such payments. 
Every club or organization having life members, 
shall collect from such members the amount of the 
tax imposed by section Soi. In all the above cases 
returns and payments of the amount so collected 
shall be made at the same time and in the same 
manner and subject to the same penalties and in- 
terest as provided in section 502. 



Tax on articles 
sold or leased 



Automobile trucks 
and wagons 



Automobiles and 
motor cycles 



Title IX.— Excise Taxes. 

Sec. 900. That from and after January i, 1922, 
there shall be levied, assessed, collected, and paid 
upon the following articles sold or leased by the 
manufacturer, producer, or importer, a tax equiva- 
lent to the following percentages of the price for 
which so sold or leased — 

( 1 ) Automobile trucks and automobile wagons 
(including tires, inner tubes, parts, and accessories 
therefor, sold on or in connection therewith or with 
the sale thereof), 3 per centum; 

(2) Other automobiles and motor cycles (in- 
cluding tires, inner tubes, parts, and accessories 
therefor, sold on or in connection therewith or with 
the sale thereof), except tractors, 5 per centum; 



150 



Sec. 900 
EXCISE TAXES 

(I) Tires, inner tubes, parts, or accessories for Automobiu 

\ ^ / J J r J accessories 

any of the articles enumerated in subdivision ( i ) 
or (2), sold to any person other than a manufact- 
urer or producer of any of the articles enumerated 
in subdivision (i) or (2), 5 per centum; 

(4) Cameras, weighing not more than 100 cmer.. 
pounds, and lenses for such cameras, 10 per 
centum ; 

(5) Photographic films and plates (other than lu^°l^^pl^t», 
moving-picture films), 5 per centum; 

(6) Candy, 3 per centum; ^"^^ 

(7) Firearms, shells, and cartridges, except ^;t?rd"« '*""""'' 
those sold for the use of the United States, any 

State, Territory, or possession of the United States, 
any political subdivision thereof, or the District 
of Columbia, 10 per centum; 

(8) Hunting and bowie knives, 10 per centum; Hunting kni™. 

(9) Dirk knives, daggers, sword canes, stilettos, f*^|^bruM''i^ucki.. 
and brass or metallic knuckles, 100 per centum; 

(10) Cigar or cigarette holders and pipes, com- ^/■^^ttl^houlf. 
posed wholly or in part of meerschaum or amber, 
humidors, and smoking stands, 10 per centum; 

(II) Automatic slot-device vending machines, ^'iS.TnV.'"'"* 
5 per centum, and automatic slot-device weighing 
machines, 10 per centum; if the manufacturer, 
producer, or importer of any such machine oper- 
ates it for profit, he shall pay a tax in respect to 

each such machine put into operation equivalent to 
5 per centum of its fair market value in the case 
of a vending machine, and 10 per centum of its 
fair market value in the case of a weighing 
machine; 

151 



Sec. 901 



Liveries 



Hunting and riding 
garments 



Boats 



Computation of 
tax (see section 901) 



Tax in lieu of tax 
of Act of 1918 



Tax based on fair 
market value when 
price is less 



REVENUE ACT OF 1921 

(12) Liveries and livery boots and hats, 10 per 
centum ; 

(13) Hunting-and shooting-garments and riding 
habits, 10 per centum; 

(14) Yachts and motor boats not designed for 
trade, fishing, or national defense; and pleasure 
boats and pleasure canoes if sold for more than 
$100, 10 per centum. 

If any manufacturer, producer, or importer of 
any of the articles enumerated in this section cus- 
tomarily sells such articles both at vi^holesale and at 
retail, the tax in the case of any article sold by him 
at retail shall be computed on the price for which 
like articles are sold by him at w^holesale. 

The taxes imposed by this section shall, in the 
case of any article in respect to which a correspond- 
ing tax is imposed by section 900 of the Revenue 
Act of 191 8, be in lieu of such tax. 

Sec. 901. That if any person who manufact- 
ures, produces or imports any article enumerated 
in section 900, or leases or licenses for exhibition 
any positive motion-picture film containing a pic- 
ture ready for projection, (a) sells, leases, or 
licenses such article to a corporation affiliated 
with such person within the meaning of section 
240 of this Act, at less than the fair market price 
obtainable therefor, the tax thereon shall be com- 
puted on the basis of the price at which such article 
is sold, leased or licensed by such affiliated cor- 
poration; and (b) if any such person sells, leases, 
or licenses such article whether through any agree- 
ment, arrangement, or understanding, or otherwise, 
at less than the fair market price obtainable there- 



152 



Sees. 902, 903 

EXCISE TAXES 

for, either (i) in such manner as directly or in- 
directly to benefit such person or any person 
directly or indirectly interested in the business of 
such person, "or (2) with intent to cause su^ch 
benefit, the amount for which such article is sold, 
leased or licensed shall be taken to be the amount 
which would have been received from the sale, 
lease or license of such article if sold, leased or 
licensed at the fair market price. 

Sec. 902. That there shall be levied, assessed, prrn?S.gt'lnd 
collected, and paid upon sculpture, paintings, ""'p'""=% 
statuary, art porcelains, and bronzes, sold by any 
person other than the artist, a tax equivalent to 5 
per centum of the price for which so sold. This 
section shall not apply to the sale of any such 
article (i) to an educational institution or public 
art museum, or (2) by any dealer in such articles 
to another dealer in such articles for resale. 

Sec. 903. That every person liable for any tax ^°\y™ j'o'j"*|'(,2 
imposed by section 900, 902, or 904, shall make °'J'°*i,^°lJ^t"' 
monthly returns under oath in duplicate and pay 
the taxes imposed by such sections to the collector 
for the district in which is located the principal 
place of business. Such returns shall contain such 
information and be made at such times and in such 
manner as the Commissioner, with the approval 
of the Secretary, may by regulations prescribe. 

The tax shall, without assessment by the Com- Ta>tdu. 
missioner or notice from the collector, be due and 
payable to the collector at the time so fixed for 
filing the return. If the tax is not paid when due, Penalty for delay 
there shall be added as part of the tax a penalty 
of 5 per centum, together with interest at the rate 
of I per centum for each full month, from the 
time when the tax became due. 

153 



Sees. B04, 905 



Tax on excess prices 
of articles sold, 5% 
of excess over 
amount specified 



Carpets and ru^s 



Trunks 



Valises, etc. 



Purses and hand 
baffs 



Portable liffhting: 
fixtures 



Tax on sale of 
jewelry, 5% 



REVENUE ACT OF 1921 

Sec. 904. That from and after January i, 1922, 
there shall be levied, assessed, collected and paid, 
in lieu of the taxes imposed by section 904 of the 
Revenue Act of 1918, upon the following articles 
sold or leased by the manufacturer, producer, or 
importer, a tax equivalent to 5 per centum of so 
much of the price for which so sold or leased as is 
in excess of the price hereinafter specified as to 
each such article — 

(i) Carpets and rugs, including fiber, on the 
amount in excess of $4.50 per square yard in the 
case of carpets and $6 per square yard in the case 
of rugs ; 

(2) Trunks, on the amount in excess of $35 
each; 

(3) Valises, traveling bags, suit cases, hat boxes 
used by travelers, and fitted toilet cases, on the 
amount in excess of $25 each; 

(4) Purses, pocketbooks, shopping and hand 
bags, on the amount in excess of $5 each ; 

(5) Portable lighting fixtures, including lamps 
of all kinds and lamp shades, on the amount in 
excess of $10 each; 

(6) Fans, on the amount in excess of $1 each. 

Sec. 905. (a) That on and after January i, 
1922, there shall be levied, assessed, collected, and 
paid (in lieu of the tax imposed by section 905 of 
the Revenue Act of 191 8) upon all articles com- 
monly or commercially known as jewelry, whether 
real or imitation ; pearls, precious and semiprecious 
stones, and imitations thereof ; articles made of, or 
ornamented, mounted or fitted with, precious met- 
als or imitations thereof or ivory (not including 



154 



Sec. 906 



EXCISE TAXES 



surgical instruments, eyeglasses, and spectacles); TaxonsaUof 
watches ; clocks ; opera glasses ; lorgnettes ; marine |,°'|^fd"f;,^,'' °^"" 
glasses; field glasses; and binoculars; upon any of 
the above when sold by or for a dealer or his estate 
for consumption or use, a tax equivalent to 5 per 
centum of the price for which so sold. 

(b) Every person selling any of 'the articles p^ymrntTf^tax 
enumerated in this section shall make returns under 

an oath in duplicate (monthly or quarterly as the 
Commissioner, with the approval of the Secretary, 
may prescribe) and pay the taxes imposed in re- 
spect to such articles by this section to the collector 
for the district in which is located the principal 
place of business. Such returns shall contain such 
information and be made at such times and in such 
manner as the Commissioner, with the approval of 
the Secretary, may by regulations prescribe. 

(c) The tax shall, without assessment by the Taxdu. 
Commissioner or notice from the collector, be due 

and payable to the collector at the time so fixed 
for filing the return. If the tax is not paid when Penalty 
due, there shall be added as part of the tax a pen- 
alty of 5 per centum, together with interest at 
the rate of i per centum for each full month, from 
the time when the tax became due. 

Sec. 906. (a) That if (i) any person has, prior ^^^='^°'„^;;^°;; 
to August 15, 1 92 1, made a bona fide contract with '"t^'hSVc"""™ 
a dealer for the sale or lease, after the tax takes 
eflfect, of any article in respect to which a tax is 
imposed by section 900 or 904, or by this subdivi- 
sion, and in respect to which no corresponding 
tax was imposed by section 900 of the Revenue 
Act of 191 8, and (2) such contract does not permit 
the adding, to the amount to be paid thereunder, 

155 



Sec. 906 



Additional tax due in 
certain cases 



Refunds 
under certain 
prior contracts 
including tax 
under Act of 1918 



Refunds 
under certain 
prior contracts 
to take effect 
after Dec. 31, 1918 



REVENUE ACT OF 1921 

of the whole of the tax imposed by section 900 or 
904 of this Act or by this subdivision; then the 
vendee or lessee shall, in lieu of the vendor or 
lessor, pay so much of the tax imposed by section 
900 or 904 of this Act or by this subdivision as is 
not so permitted to be added to the contract price. 
If a contract of the character above described was 
made with any person other than a dealer, no tax 
shall be collected under this Act. 

(b) If (i) any person has, prior to August 15, 
1 92 1, made a bona fide contract with any other 
person for the sale or lease, after the tax takes 
effect, of any article in respect to which a tax is 
imposed by section 900 of the Act, and in respect 
to which a corresponding but greater tax was im- 
posed by section 900 of the Revenue Act of 191 8, 
(2) the contract price includes the amount of the 
tax imposed by section 900 of the Revenue Act of 
191 8, and (3) such contract does not permit the 
deduction, from the amount to be paid thereunder, 
of the whole of the difference between the corres- 
ponding tax imposed by section 900 of the Revenue 
Act of 191 8 and the tax imposed by section 900 of 
this Act; then the vendor or lessor shall refund to 
the vendee or lessee so much of the amount of such 
difference as is not so permitted to be deducted 
from the contract price. 

(c) If (i) any person has, prior to August 15, 
192 1, made a bona fide contract with any other 
person for the sale or lease, after December 31, 
1 92 1, of any article in respect to which a tax was 
imposed by section 900 of the Revenue Act of 191 8, 
and in respect to which no corresponding tax is 
imposed by section 900 of this Act, (2) the con- 
tract price includes the amount of the tax imposed 

156 



Sec. 1000 



SPECIAL TAXES— CAPITAL STOCK TAX 



and collection 



by section 900 of the Revenue Act of 191 8, and (3) 
such contract does not permit deduction, from the 
amount to be paid thereunder, of the tax imposed 
by section 900 of the Revenue Act of 1918; then 
the vendor or lessor shall refund to the vendee or 
lessee so much of the amount of such tax as is not 
so permitted to be deducted from the contract 
price. 

(d) The taxes payable by the vendee or lessee Tax due 
under subdivision (a), shall be paid to the vendor 
or lessor at the time the sale or lease is consum- 
mated, and collected, returned, and paid to the 
United States by such vendor or lessor in the same 
manner and subject to the same penalties and inter- 
est as provided by section 903. 

(e) Any refund by the vendor or lessor under Above refunds 
subdivision (b) or (c) shall be made at the time consummation 
the sale or lease is consummated. Upon the fail- 
ure of the vendor or lessor so to refund, he shall Penalty for 
be liable to the vendee or lessee for damages in the 

amount of three times the amount of such refund, 
and the court shall include in any judgment in fav- 
or of the vendee or lessee in any suit for the re- 
covery of such damages, costs of the suit and a 
reasonable attorney's fee to be fixed by the court. 

(f) A vendee w^ho purchases any article w^ith 
intent to use it in the manufacture or production of 
another article intended for sale shall be included 
in the term "dealer," as used in this section. 

Title X. — Special Taxes. 

Capital Stock Tax. 
Sec. iooo. (a) That on and after July i, 1922, in capital stock ta^ 
lieu of the tax imposed by section 1000 of the Rev- 
enue Act of I 91 8 — 

157 



Sec. 1001 



Domestic 
corporations 



Foreign 
corporations 



Exception of certain 
corporations 



Returns to be 
public records* 
under order of 
President 



Occupational taxes 



Brokers 



REVENUE ACT OF 1921 

( 1 ) Every domestic corporation shall pay annu- 
ally a special excise tax with respect to carrying on 
or doing business, equivalent to $i for each $i,ooo 
of so much of the fair average value of its capital 
stock for the preceding year ending June 30 as is in 
excess of $5,000, In estimating the value of capital 
stock the surplus and undivided profits shall be in- 
cluded ; 

(2) Every foreign corporation shall pay annu- 
ally a special excise tax with respect to carrying on 
or doing business in the United States, equivalent 
to $1 for each $1,000 of the average amount of cap- 
ital employed in the transaction of its business in 
the United States during the preceding year end- 
ing June 30. 

(b) The taxes imposed by this section shall not 
apply in any year to any corporation which was 
not engaged in business (or, in the case of a foreign 
corporation, not engaged in business in the United 
States) during the preceding year ending June 30, 
nor to any corporation enumerated in section 231, 
nor to any insurance company subject to the tax im- 
posed by section 243 or 246. 

(c) Section 257 shall apply to all returns filed 
with the Commissioner for purposes of the tax im- 
posed by this section. 

Miscellaneous Occupational Taxes. 

Sec. iooi. That on and after July i, 1922, there 
shall be levied, collected, and paid annually the 
following special taxes — 

( I ) Brokers shall pay $50. Every person whose 
business it is to negotiate purchases or sales of 
stocks, bonds, exchange, bullion, coined money, 

158 



Sec. 1001 
SPECIAL TAXES— OCCUPATIONAL TAXES 

bank notes, promissory notes, other securities, pro- 
duce or merchandise, for others, shall be regarded 
as a broker. If a broker is a member of a stock 
exchange, or if he is a member of any produce ex- 
change, board of trade, or similar organization, 
where produce or merchandise is sold, he shall pay 
an additional amount as follows: If the average 
value, during the preceding year ending June 30, 
of a seat or membership in such exchange or organ- 
ization was $2,000 or more but not more than 
$5,000, $100; if such value was more than $5,000, 
$150. 

(2) Pawnbrokers shall pay $100. Every person Pawnbroker, 
whose business or occupation it is to take or receive, 

by the way of pledge, pawn, or exchange, any 
goods, wares, or merchandise, or any kind of per- 
sonal property whatever, as security for the repay- 
ment of money loaned thereon, shall be regarded 
as a pawnbroker. 

(3) Ship brokers shall pay $50. Every person swpbroker. 
whose business it is as a broker to negotiate freights 

and other business for the owners of vessels or for 
the shippers or consignors or consignees of freight 
carried by vessels, shall be regarded as a ship 
broker. 

(4) Customhouse brokers shall pay $50. Every ^^^°^°"'' 
person whose occupation it is, as the agent of others, 

to arrange entries and other customhouse papers, 
or transact business at any port of entry relating to 
the importation of exportation of goods, wares, or 
merchandise, shall be regarded as a customhouse 
broker. 

(5) Proprietors of theaters, museums, and con- ^^"^^^TuViu 
cert halls, where a charge for admission is made, 

159 



Sec. 1001 



REVENUE ACT OF 1921 



having a seating capacity of not more than two 
hundred and fifty, shall pay $50; having a seating 
capacity of more than two hundred and fifty and 
not exceeding five hundred, shall pay $100; having 
a seating capacity exceeding five hundred and not 
exceeding eight hundred, shall pay $150, having a 
seating capacity of more than eight hundred, shall 
pay $200. Every edifice used for the purpose of 
dramatic or operatic or other representations, plays^ 
or performances, for admission to which entrance 
money is received, not including halls or armories 
rented or used occasionally for concerts or theat- 
rical representations and not including edifices 
owned by religious, educational or charitable in- 
stitutions, societies or organizations where all the 
proceeds from admissions inure exclusively to the 
benefit of such institutions, societies or organiza- 
tions or exclusively to the benefit of persons in the 
military or naval forces of the United States, shall 
be regarded as a theater : Provided, That in cities, 
towns, or villages of five thousand inhabitants or 
less the amount of such payment shall be one-half 
of that above stated : Provided further, That when- 
ever any such edifice is under lease at the time the 
tax is due, the tax shall be paid by the lessee, unless 
otherwise stipulated between the parties to the 
lease, 
circu. owner. ^^^ fj^g proprictor or proprietors of circuses 

shall pay $100. Every building, space, tent, or 
area, where feats of horsemanship or acrobatic 
sports or theatrical performances not otherwise 
provided for in this section are exhibited shall be 
regarded as a circus : Provided, That no special tax 
paid in one State, Territory, or the District of Co- 
lumbia shall exempt exhibitions from the tax in 

160 



Sec. 1001 

SPECIAL TAXES— OCCUPATIONAL TAXES 

another State, Territory, or the District of Colum- 
bia, and but one special tax shall be imposed for 
exhibitions within any one State, Territory, or 
District. 

(7) Proprietors or agents of all other public ^^"'"and''""" 
exhibitions or shows for money not enumerated in »««"" 

this section shall pay $15 : Provided, That a special 
tax paid in one State, Territory, or the District of 
Columbia shall not exempt exhibitions from the tax 
in another State, Territory, or the District of Co- 
lumbia, and but one special tax shall be required Exception, 
for exhibitions within any one State, Territory, or 
the District of Columbia : Provided further, That 
this paragraph shall not apply to Chautauquas, lec- 
ture lyceums, agricultural or industrial fairs, or 
exhibitions held under the auspices of religious or 
charitable associations : Provided further, That an 
aggregation of entertainments, known as a street 
fair, shall not pay a larger tax than $100 in any 
State, Territory, or in the District of Columbia. 

(8) Proprietors of bowling alleys and billiard buuIXoom'"'' 
rooms shall pay $10 for each alley or table. Every 
building or place where bowls are thrown or where 
games of billiards or pool are played, except in 
private homes, shall be regarded as a bowling alley 
or a billiard room, respectively. 

(9) Proprietors of shooting galleries shall pay shooting gaiury 
$20. Every building, space, tent, or area, where 
a charge is made for the discharge of firearms at 
any form of target shall be regarded as a shooting 
gallery. 

(10) Proprietors of riding academies shall pay RWing academy 
$100. Every building, space, tent, or area, where 
a charge is made for instruction in horsemanship or 

161 



owners 



Sec. 1001 



Automobile 
renting or 
operating 
for hire 



REVENUE ACT OF 1921 

for facilities for the practice of horsemanship shall 
be regarded as a riding academy : Provided, That 
this tax shall not be collected from associations 
composed exclusively of members of units of the 
Federalized National Guard or the Organized 
Reserve and whose receipts are used exclusively 
for the benefit of such units. 

( 1 1 ) Persons carrying on the business of oper- 
ating or renting passenger automobiles for hire 
shall pay $io for each such automobile having a 
seating capacity of more than two and not more 
than seven, and $20 for each such automobile hav- 
ing a seating capacity of more than seven. 

nqu"rdiaier"L"d (^2) Every person carrying on the business of 

manufacturer, of ^ brcvi^er, distillcr, whoksalc liquor dealer, retail 
liquor dealer, wholesale dealer in malt liquor, re- 
tail dealer in malt liquor, or manufacturer of stills, 
as defined in section 3244 as amended and section 
3247 of the Revised Statutes, in any State, Terri- 
tory, or District of the United States contrary to 
the laws of such State, Territory, or District, or in 
any place therein in which carrying on such busi- 
ness is prohibited by local or municipal law, shall 
pay, in addition to all other taxes, special or other- 
wise, ijnposed by existing law or by this Act, 
$1,000. 

The payment of the tax imposed by this subdi- 
vision shall not be held to exempt any person from 
any penalty or punishment provided for by the 
laws of any State, Territory, or District for carry- 
ing on such business in such State, Territory, or 
District, or in any manner to authorize the com'- 
mencement or continuance of such business con- 
trary to the laws of such State, Territory, or Dis- 

162 



Tax do«a not 
exempt from State 
requirements 



Sec. 1002 

SPECIAL TOBACCO MANUFACTURERS' TAX 

trict, or in places prohibited by local or municipal 
law. 

The taxes imposed by this section shall, in the J^Yofim"' 
case of persons upon whom a corresponding tax 
is imposed by section looi of the Revenue Act of 
191 8, be in lieu of such tax. 

Special Tobacco Manufacturers' Tax. 



: on 
manufacturers of 



Sec. 1002. That on and after July i, 1922, there t«^; 

shall be 'levied, collected, and paid annually, in "s"- "■«• cigarette. 

lieu of the taxes imposed by section 1002 of the 

Revenue Act of 191 8, the following special taxes, 

the amount of such taxes to be computed on the 

basis of the sales for the preceding year ending 

June 30— 

Manufacturers of tobacco whose annual sales Rate, of tax on 

- sales of tobacco 

do not exceed fifty thousand pounds shall each 
pay $6; 

Manufacturers of tobacco whose annual sales 
exceed fifty thousand and do not exceed one hun- 
dred thousand pounds shall each pay $12; 

Manufacturers of tobacco whose annual sales 
exceed one hundred thousand and do not exceed 
two hundred thousand pounds shall each pay $24; 

Manufacturers of tobacco whose annual sales 
exceed two hundred thousand pounds shall each 
pay $24, and at the rate of 16 cents per thousand 
pounds, or fraction thereof, in respect to the excess 
over two hundred thousand pounds ; 



on 
cigar. 



Manufacturers of cigars whose annual sales do Rate, of tax 

o sales of ciffai 

not exceed fifty thousand cigars shall each pay $4; 

163 



Sec. 1003 



Rate on sale of 
cigarettes 



Tax on each class 
of articles made 



Exports not 
included 



Tax on yacht and 
boat users 



REVENUE ACT OF 1921 

Manufacturers of cigars whose annual sales ex- 
ceed fifty thousand and do not exceed one hundred 
thousand cigars shall each pay $6 ; 

Manufacturers of cigars whose annual sales ex- 
ceed one hundred thousand and do not exceed two 
hundred thousand cigars shall each pay $12; 

Manufacturers of cigars whose annual sales ex- 
ceed two hundred thousand and do not exceed four 
hundred thousand cigars shall each pay $24; 

Manufacturers of cigars whose annual sales ex- 
ceed four hundred thousand cigars shall each pay 
$24, and at the rate of 10 cents per thousand cigars, 
or fraction thereof, in respect to the excess over 
four hundred thousand cigars ; 

Manufacturers of cigarettes, including small 
cigars weighing not more than three pounds per 
thousand, shall each pay at the rate of 6 cents for 
every ten thousand cigarettes, or fraction thereof. 

In arriving at the amount of special tax to be 
paid under this section, and in the levy and collec- 
tion of such tax, each person engaged in the manu- 
facture of more than one of the classes of articles 
specified in this section shall be considered and 
deemed a manufacturer of each class separately. 

In computing under this section the amount of 
annual sales no account shall be taken of tobacco, 
cigars, or cigarettes, sold for export and in due 
course so exported. 

Special Tax on Use of Boats. 

Sec. 1003. That on and after July i, 1922, and 
thereafter on July i in each year, and also at the 
time of the original purchase of a new boat by a 

164 



Sec. 1004 



SPECIAL TAXES— TAX ON USE OF BOATS 



user, if on any other date than July i, there shall 
be levied, assessed, collected, and paid, in lieu of 
the tax imposed by section 1003 of the Revenue Act 
of 191 8, upon the use of yachts, pleasure boats, 
povi^er boats, sailing boats, and motor boats vi^ith 
fixed engines, of over five net tons and over thii'ty- 
two feet in length, not used exclusively for trade, 
fishing, or national defense, or not built according 
to plans and specifications approved by the Navy 
Department, a special excise tax to be based on 
each yacht or boat, at rates as follows: Yachts, 
pleasure boats, power boats, motor boats with fixed 
engines, and sailing boats, of over five net tons, 
length over thirty-two feet and not over fifty feet, 
$1 for each foot; length over fifty feet and not over 
one hundred feet, $2 for each foot; length over one 
hundred feet, $4 for each foot. 

-In determining the length of such yachts, plea- f,VJo?tax 
sure boats, power boats, motor boats with fixed en- 
gines, and sailing boats, the measurement of over 
all length shall govern. 

In the case of a tax imposed at the time of the ^a^x'Tor prrTo"!"' 
original purchase of a new boat on any other date ''*" 
than July i , the amount to be paid shall be the same 
number of twelfths of the amount of the tax as the 
number of calendar months (including the month 
of sale) remaining prior to the following July i. 

This section shall not apply to vessels or boats ExcepUc 

'^ *• •' or exetn 

used without profit by any benevolent, charitable, 
or religious organizations, exclusively for furnish- 
ing aid, comfort, or relief to seamen. 

Penalty for Nonpayment of Special Taxes. 
Sec. 1004. That any person who carries on any nonpaymintof 

,, .<• 1*1 *1j.* excise special and 

business or occupation for which a special tax is occupational t««. 

165 



>tion 
or exemptions 



Sec. 1005 



REVENUE ACT OF 1921 

imposed by sections looo, looi or 1002, without 
having paid the special tax therein provided, shall, 
besides being liable for the payment of such special 
tax, be subject to a penalty of not more than $1,000 
or to imprisonment for not more than one year, or 
both. 



Tax on narcotitrs 



Dealer in opium 
and derivatives to 
register and 
pay tax 



Tax on Narcotics. 

Sec. 1005. That section i of the Act entitled "An 
Act to provide for the registration of, with collec- 
tors of internal revenue, and to impose a special 
tax upon all persons who produce, import, manu- 
facture, compound, deal in, dispense, sell, distrib- 
ute, or give away opium or coca leaves, their salts, 
derivatives, or preparations, and for other pur- 
poses," approved December 17, 191 4, as amended 
by section 1006 of the Revenue Act of 191 8, is re- 
enacted without change, as follows : 

"Section i. That on or before July i of each year 
every person who imports, manufactures, produces, 
compounds, sells, deals in, dispenses, or gives away 
opium or coca leaves, or any compound, manufac- 
ture, salt, derivative, or preparation thereof, shall 
register with the collector of internal revenue of 
the district his name or style, place of business and 
place or places where such business is to be carried 
on, and pay the special taxes hereinafter provided; 

"Every person who on January i, 1919, is en- 
gaged in any of the activities above enumerated, or 
who between such date and the passage of this Act 
first engaged in any of such activities, shall within 
thirty days after the passage of this Act make like 
registration, and shall pay the proportionate part 
of the tax for the period ending June 30, 1919; and 

166 



Sec. 1005 



SPECIAL TAXES— TAX ON NARCOTICS 



"Every person who first engages in any of such 
activities after the passage of this Act shall imme- 
diately make like registration and pay the propor- 
tionate part of the tax for the period ending on the 
following June 30th ; 

"Importers, manufacturers, producers, or com- ^^Sl^[^"„a 
pounders, $24 per annum; wholesale dealers, $12 <»"p«"»«" 
per annum; retail dealers, $6 per annum; physi- 
cians, dentists, veterinary surgeons, and other prac- 
titioners lawfully entitled to distribute, dispense, 
give away, or administer any of the aforesaid drugs 
to patients upon whom they in the course of their 
professional practice are in attendance, shall pay 
$3 per annum. 

"Every person who imports, manufactures, com- ^^'/acturer or 
pounds, or otherwise produces for sale or distribu- p""*""' ^'(^"^ 
tion any of the aforesaid drugs shall be deemed to 
be an importer, manufacturer, or producer. 

"Every person who sells or ofifers for sale any of ^^°'«j"'' ■'"'"■ 
said drugs in the original stamped packages, as 
hereinafter provided, shall be deemed a wholesale 
dealer. 

"Every person who sells or dispenses from orig- d.toJd'*"'*'' 
inal stamped packages, as hereinafter provided, 
shall be deemed a retail dealer: Provided, That 
the ofHce, or if none, the residence, of any person 
shall be considered for the purpose of this Act his 
place of business; but no employee of any person 
who has registered and paid special tax as herein 
required, acting within the scope of his employ- 
ment, shall be required to register and pay special 
tax provided by this section : Provided further, 
That officials of the United States, Territorial, Dis- 
trict of Columbia, or insular possessions. State or 

167 



Sec. 1005 



Unlawful to deal 
unless reg^istered 



'Person* as 

used in Act includes 

partnership, 

association, 

company and 

corporation 



Tax rate on 
narcotics sold 



Tax paid by 

stamp 



REVENUE ACT OF 1921 

municipal governments, who in the exercise of 
their official duties engage in any of the business 
herein described, shall not be required to register, 
nor pay special tax, nor stamp the aforesaid drugs 
as hereinafter prescribed, but their right to this 
exemption shall be evidenced in such manner as the 
Commissioner of Internal Revenue, v^^ith the ap- 
proval of the Secretary of the Treasury, may by 
regulations prescribe. 

"It shall be unlawful for any person required to 
register under the provisions of this Act to import, 
manufacture, produce, compound, sell, deal in, dis- 
pense, distribute, administer, or give away any of 
the aforesaid drugs without having registered and 
paid the special tax as imposed by this section. 

"That the word 'person' as used in this Act shall 
be construed to mean and include a partnership, 
association, company, or corporation, as well as a 
natural person; and all provisions of existing law 
relating to special taxes, as far as necessary, are 
hereby extended and made applicable to this 
section. 

"That there shall be levied, assessed, collected, 
and paid upon opium, coca leaves, any compound, 
salt, derivative, or preparation thereof, produced 
in or imported into the United States, and sold, or 
removed for consumption or sale, an internal-rev- 
enue tax at the rate of i cent per ounce, and any 
fraction of an ounce in a package shall be taxed as 
an ounce, such tax to be paid by the importer, 
manufacturer, producer, or compounder thereof, 
and to be represented by appropriate stamps, to be 
provided by the Commissioner of Internal Rev- 
enue, with the approval of the Secretary of the 

i68 



Sec. 100 

SPECIAL TAXES— TAX ON NARCOTICS 

Treasury; and the stamps herein provided shall 
be so affixed to the bottle or other container as to 
securely seal the stopper, covering, or wrapper 
thereof. 

"The tax imposed by this section shall be in ad- 
dition to any import duty imposed on the aforesaid 
drugs. 

"It shall be unlawful for any person to purchase, 
sell, dispense, or distribute any of the aforesaid 
drugs except in the original stamped package or 
from the original stamped package; and the ab- 
sence of appropriate tax-paid stamps from any of 
the aforesaid drugs shall be prima facie evidence 
of a violation of this section by the person in whose 
possession same may be found ; and the possession 
of any original stamped package containing any 
of the aforesaid drugs by any person who has not 
registered and paid special taxes as required by this 
section shall be prima facie evidence of liability to 
such special tax: Provided, That the provisions of Exception 
this paragraph shall not apply to any person hav- loosf'^" °°"""''" 
ing in his or her possession any of the aforesaid 
drugs which have been obtained from a registered 
dealer in pursuance of a prescription, written for 
legitimate medical uses, issued by a physician, 
dentist, veterinary surgeon, or other practitioner 
registered under this Act; and where the bottle or 
other container in which such drug may be put up 
by the dealer upon said prescription bears the name 
and registry number of the druggist, serial number 
of prescription, name and address of the patient, 
and name, address, and registry number of the per- 
son writing said prescription; or to the dispensing 
or administration, or giving away of any of the 
aforesaid drugs to a patient by a registered physi- 

169 



Sec. 1006 



Seizure 

of unstamped 

packages 



Records and 
returns 



Comm issioner 
to make 
regulations 



Section 6 of 

Act of Dec. 17, 1914 

re-enacted 



REVENUE ACT OF 1921 

cian, dentist, veterinary surgeon, or other practi- 
tioner in the course of his professional practice, and 
where said drugs are dispensed or adminstered to 
the patient for legitimate medical purposes, and the 
record kept as required by this Act of the drugs so 
dispensed, administered, distributed, or given 
away. 

"And all the provisions of existing laws relating 
to the engraving, issuance, sale, accountability, can- 
cellation, and destruction of tax-paid stamps pro- 
vided for in the internal-revenue laws are, in so far 
as necessary, hereby extended and made to apply 
to stamps provided by this section. 

"That all unstamped packages of the aforesaid 
drugs found in the possession of any person, except 
as herein provided, shall be subject to seizure and 
forfeiture, and all the provisions of existing inter- 
nal-revenue laws relating to searches, seizures, and 
forfeitures of unstamped articles are hereby ex- 
tended to and made to apply to the articles taxed 
under this Act and the persons upon whom these 
taxes are imposed. 

"Importers, manufacturers, and wholesale deal- 
ers shall keep such books and records and render 
such monthly returns in relation to the transactions 
in the aforesaid drugs as the Commissioner of In- 
ternal Revenue, with the approval of the Secretary 
of the Treasury, may by regulations require. 

"The Commissioner of Internal Revenue, with 
the approval of the Secretary of the Treasury, shall 
make all needful rules and regulations for carrying 
the provisions of this Act into effect." 

Sec. 1006. That section 6 of such Act of Decem- 
ber 17, 1 9 14, as amended by section 1007 of the 



170 



Sec. 1006 
SPECIAL TAXES— TAX ON NARCOTICS 

Revenue Act of 1918, is re-enacted without change, 
as follows : • 



ion 
on 
narcotics 



"Sec. 6. That the provisions of this Act shall not f„T« 
be construed to apply to the manufacture, sale, dis- 
tribution, giving away, dispensing, or possession of 
preparations and remedies which do not contain 
more than two grains of opium, or more than one- 
fourth of a grain of morphine, or more than one- 
eighth of a grain of heroin, or more than one grain 
of codeine, or any salt or derivative of any of them 
in one fluid ounce, or, if a solid or semisolid prepa- 
ration, in one avoirdupois ounce; or to liniments, 
ointments, or other preparations which are pre- 
pared for external use, only, except liniments, oint- 
ments ,and other preparations which contain co- 
caine or any of its salts or alpha or beta eucaine or 
any of their salts or any synthetic substitute for 
them : Provided, That such remedies and prepara- 
tions are manufactured, sold, distributed, given 
away, dispensed, or possessed as medicines and not 
for the purpose of evading the intentions and pro- 
visions of this Act: Provided further, That any teptfortwo' 
manufacturer, producer, compounder, or vendor ^'"' 
(including dispensing physicians) of the prepara- 
tions and remedies mentioned in this section shall 
keep a record of all sales, exchanges, or gifts of 
such preparations and remedies in such manner as 
the Commissioner of Internal Revenue, with the 
approval of the Secretary of the Treasury, shall 
direct. Such record shall be preserved for a period 
of two years in such a way as to be readily access- 
ible to inspection by any officer, agent or employee 
of the Treasury Department duly authorized for 
that purpose, and the State, Territorial, District, 
municipal, and insular officers named in section 5 

171 



Sec. 1007 



Special tax 
of $1 for dispensers 
of narcotics 'who 
pav no other tax 
under the Act 



Exception of certain 
preparations of 
coca leaves 



Opiates 
seized may 
be used for 
medicinal or 
scientific purposes 
by Government 



REVENUE ACT OF 1921 

of this Act, and every such person so possessing or 
disposing of such preparations and remedies shall 
register as required in section i of this Act and, if 
he is not paying a tax under this Act, he shall pay a 
special tax of $i for each year, or fractional part 
thereof, in which he is engaged in such occupation, 
to the collector of internal revenue of the district 
in which he carries on such occupation as provided 
in this Act. The provisions of this Act as amended 
shall not apply to decocainized coca leaves or prep- 
arations made therefrom, or to other preparations 
of coca leaves which do not contain cocaine." 

Sec. 1007. That all opium, its salts, derivatives, 
and compounds, and coca leaves, salts, derivatives, 
and compounds thereof, which may now be under 
seizure or which may hereafter be seized by the 
United States Government from any person or per- 
sons charged with any violation of the Act 'of 
October i, 1890, as aniended by the Acts of March 
3, 1897, February 9, 1909, and January 17, 1914, 
or the Act of December 17, 1 914, as amended, shall 
upon conviction of the person or persons from 
whom seized be confiscated by and forfeited to the 
United States ; and the Secretary is hereby author- 
ized to deliver for medical or scientific purposes 
to any department, bureau, or other agency of the 
United States Government, upon proper applica- 
tion therefor, under such regulation as may be 
prescribed by the Commissioner, with the approval 
of the Secretary, any of the drugs so seized, con- 
fiscated, and forfeited to the United States. 

The provisions of this section shall also apply to 
any of the aforesaid drugs seized or coming into 
the possession of the United States in the enforce- 
ment of any of the above mentioned Acts where the 

172 



Sees. 1100, 1101 



STAMP TAXES 

owner or owners thereof are unknown. None of the 
aforesaid drugs coming into possession of the 
United States under the operation of said Acts, or 
the provisions of this section, shall be destroyed 
without certification by a committee appointed by 
the Commissioner, with the approval of the Sec- 
retary, that they are of no value for medical or 
scientific purposes. 

Title XI. — Stamp Taxes. 



I tax 



I documents 



Sec. iioo. That on and after January i, 1922, f^^^^J 
there shall be levied, collected, and paid, for and 
in respect of the several bonds, debentures, or cer- 
tificates of stock and of indebtedness, and other 
documents, instruments, matters, and things men- 
tioned and described in Schedule A of this title, 
or for or in respect of the vellum, parchment, or 
paper upon which such instruments, matters, or 
things, or any of them, are written or printed, by 
any person who makes, signs, issues, sells, removes, 
consigns, or ships the same, or for whose use or 
benefit the same are made, signed, issued, sold, re- 
moved, consigned, or shipped, the several taxes 
specified in such schedule. The taxes imposed by 
this section shall, in the case of any article upon 
which a corresponding stamp tax is now imposed 
by law, be in lieu of such tax. 

Sec. iioi. That there shall not be taxed under ^^e-npt from .tamp 
this title any bond, note, or other instrument, issued 
by the United States, or by any foreign Govern- 
ment, or by any State, Territory, or the District of 
Columbia, or local subdivision thereof, or muni- 
cipal or other corporation exercising the taxing 
power; or any bond of indemnity required to be 
filed by any person to secure payment of any pen- 

173 



tax 



Sees. 1102, 1103 



Neffligent 
violations 



Playingr cards sold 
without tax paid 



Failure to 
cancel stamps 



Penalty 



Fraudulent 
violations 



REVENUE ACT OF 1921 

sion, allowance, allotment, relief, or insurance by 
the United States, or to secure a duplicate for, or 
the payment of, any bond, note, certificate of in- 
debtedness, war-savings certificate, warrant or 
check issued by the United States; or stocks and 
bonds issued by cooperative building and loan as- 
sociations which are organized and operated ex- 
clusively for the benefit of their members and make 
loans only to their shareholders, or by mutual ditch 
or irrigation companies. 

Sec. II02. That whoever — 

(a) Makes, signs, issues, or accepts, or causes 
to be made, signed, issued, or accepted, any instru- 
ment, document, or paper of any kind or descrip- 
tion whatsoever without the full amount of tax 
thereon being duly paid ; 

(b) Manufactures or imports and sells, or offers 
for sale, or causes to be manufactured or imported 
and sold, or offered for sale, any playing cards, 
package, or other article without the full amount of 
tax being duly paid; 

(c) Makes use of any adhesive stamp to denote 
any tax imposed by this title without canceling or 
obliterating such stamp as prescribed in section 
1 104; 

Is guilty of a misdemeanor and upon conviction 
thereof shall pay a fine of not more than $100 for 
each offense. 

Sec. 1 103. That whoever — 

(a) Fraudulently cuts, tears, or removes from 
any vellum, parchment, paper, instrument, writ- 
ing, package, or article, upon which any tax is 

174 



Sec. 1103 



STAMP TAXES 

imposed by this title, any adhesive stamp or the 
impression of any stamp, die, plate, or other article 
provided, made, or used in pursuance of this title; 

(b) Fraudulently uses, joins, fixes, or places to, 
with, or upon any vellum, parchment, paper, in- 
strument, writing, package, or article, upon which 
any tax is imposed by this title, ( i ) any adhesive 
stamp, or the impression of any stamp, die, plate, 
or other article, which has been cut, torn, or re- 
moved from any other vellum, parchment, paper, 
instrument, writing, package, or article, upon 
which any tax is imposed by this title; or (2) any 
adhesive stamp or the impression of any stamp, die, 
plate, or other article of insufficient value; or (3) 
any forged or counterfeited stamp, or the impres- 
sion of any forged or counterfeited stamp, die, 
plate, or other article ; 

(c) Willfully removes, or alters the cancella- ^",'/"iI,„» 
tion, or defacing marks of, or otherwise prepares, 

any adhesive stamp, with intent to use, or cause the 
same to be used, after it has been already used, or 
knowingly or willfully buys, sells, offers for sale, 
or gives away, any such washed or restored stamp 
to any person for use, or knowingly uses the same ; 

(d) Knowingly and without lawful excuse (the 
burden of proof of such excuse being on the ac- 
cused) has in possession any washed, restored, or 
altered stamp, which has been removed from any 
vellum, parchment, paper, instrument, writing, 
package, or article; 

Is guilty of a misdemeanor, and upon conviction "••"••ty 
shall be punished by a fine of not more than $1,000, 
or by imprisonment for not more than five years, or 
both, and any such reused, canceled, or counterfeit 

175 



Sees. 1104-1106 



Cancellation 
of stamps 



Distribution 
of stamps 



Application of 
other laws 



Post office to 
sell stamps 



REVENUE ACT OF 1921 

Stamp and the vellum, parchment, document, 
paper, package, or article upon which it is placed 
or impressed shall be forfeited to the United States. 

Sec. 1 104. That whenever an adhesive stamp 
is used for denoting any tax imposed by this title, 
except as hereinafter provided, the person using or 
affixing the same shall write or stamp or cause to 
be written or stamped thereupon the initials of his 
or its name and the date upon which the sanie is 
attached or used, so that the same may not again be 
used : Provided, That the Commissioner may pre- 
scribe such other method for the cancellation of 
such stamps as he may deem expedient. 

Sec. 1 105. (a) That the Commissioner shall 
cause to be prepared and distributed for the pay- 
ment of taxes prescribed in this title suitable stamps 
denoting the tax on the document, articles, or thing 
to which the same may be affixed, and shall pre- 
scribe such method for the affixing of said stamps 
in substitution for or in addition to the method 
provided in this title, as he may deem expedient. 

(b) All internal revenue laws relating to the 
assessment and collection of taxes are hereby ex- 
tended to and made a part of this title, so far as 
applicable, for the purpose of collecting stamp 
taxes omitted through mistake or fraud from any 
instrument, document, paper, writing, parcel, 
package, or article named therein. 

Sec. 1 1 06. That the Commissioner shall furnish 
to the Postmaster General without prepayment a 
suitable quantity of adhesive stamps to be dis- 
tributed to and kept on sale by the various post- 
masters in the United States. The Postmaster 
General may require each such postmaster to give 

176 



Sec. 1107 
STAMP TAXES 

additional or increased bond as postmaster for the 
value of the stamps so furnished, and each such 
postmaster shall deposit the receipts from the sale 
of such stamps to the credit of and render accounts 
to the Postmaster General at such times and in such 
form as he may by regulations prescribe. The 
Postmaster General shall at least once monthly 
transfer all collections from this source to the 
Treasury as internal-revenue collections. 

Sec. 1107. (a) That each collector shall fur- furnuh "amp» to 
nish, vi^ithout prepayment, to any assistant treasurer ^^'s^^t^^ "s«nt8 
or designated depositary of the United States, 
located in the district of such collector, a suitable 
quantity of adhesive stamps to be kept on sale by 
such assistant treasurer or designated depositary. 

(b) Each collector shall furnish, without pre- 
payment, to any person who is (i) located in the 
district of such collector, (2) duly appointed and 
acting as agent of any State for the sale of stock 
transfer stamps of such State, and (3) designated 
by the Commissioner for the purpose, a suitable 
quantity of such adhesive stamps as are required by 
subdivisions 2, 3, and 4 of Schedule A of this title, 
to be kept on sale by such person. 

(c) In such cases the collector may require a 
bond, with sufficient sureties, in a sum to be fixed 
by the Commissioner, conditioned for a faithful re- 
turn, whenever so required, of all quantities or 
amounts undisposed of, and for the payment 
monthly of all quantities or amounts sold or not 
remaining on hand. The Secretary may from time 
to time make such regulations as he may find neces- 
sary to insure the safe-keeping or prevent the illegal 
use of all such adhesive stamps. 

177 



Schedule A 
following Sec. 1107 



Schedule A 
Stamp taxes 

Bonds, certificates 
of indebtedness 



Capital stock 
issued 



Affixingr of stamps 



Capital stock, sales 
or transfer 



REVENUE ACT OF 1921 

Schedule A. — Stamp Taxes. 

1. Bonds of indebtedness: On all bonds, de- 
bentures, or certificates of indebtedness issued by 
any person, and all instruments, however termed, 
issued by any corporation with interest coupons or 
in registered form, known generally as corporate 
securities, on each $ioo of face value or fraction 
thereof, 5 cents : Provided, That every renewal of 
the foregoing shall be taxed as a new issue : Pro- 
vided further, That when a bond conditioned for 
the repayment or payment of money is given in a 
penal sum greater than the debt secured, the tax 
shall be based upon the amount secured. 

2. Capital stock issued : On each original issue, 
whether on organization or reorganization, of cer- 
tificates of stock, or of profits, or of interest in 
property or accumulations, by any corporation, on 
each $100 of face value or fraction thereof, 5 cents : 
Provided, That where a certificate is issued with- 
out face value, the tax shall be 5 cents per share, 
unless the actual value in excess of $100 per share, 
in which case the tax shall be 5 cents on each $100 
of actual value or fraction thereof, or unless the 
actual value is less than $100 per share, in which 
case the tax shall be i cent on each $20 of actual 
value, or fraction thereof. 

The stamps representing the tax imposed by this 
subdivision shall be attached to the stock books and 
not to the certificates issued. 

3. Capital stock, sales or transfers : On all sales, 
or agreements to sell, or memoranda of sales, or 
deliveries of, or transfers of legal title to shares or 
certificates of stock or of profits or of interest in 
property or accumulations in any corporation, or 

178 



Schedule A 
following Sec. 1107 
STAMP TAXES 

to rights to subscribe for or to receive such shares 
or certificates, whether made upon or shown by 
the books of the corporation, or by any assignment 
in blank, or by any delivery, or by any paper or 
agreement or memorandum or other evidence of 
transfer or sale, whether entitling the holder in any 
manner to the benefit of such stock, interest, or 
rights, or not, on each $ioo of face value of fraction 
thereof, 2 cents, and where such shares are without 
par or face value, the tax shall be 2 cents on the 
transfer or sale or agreement to sell on each share : 
Provided, That it is not intended by this title to 
impose a tax upon an agreement evidencing a de- 
posit of certificates as collateral security for money i^ot'^il" """'""' 
loaned thereon, which certificates are not actually 
sold, nor upon the delivery or transfer for such 
purpose of certificates so deposited, nor upon mere 
loans of stock nor upon the return of stock so 
loaned : Provided further, That the tax shall not 
be imposed upon deliveries or transfers to a broker Tran.fer to broker 
for sale, nor upon deliveries or transfers by a broker 
to a customer for whom and upon whose order he 
has purchased same, but such deliveries or trans- 
fers shall be accompanied by a certificate setting 
forth the facts: Provided further. That in case 
of sale where the evidence of transfer is shown 
only by the books of the corporation the stamp 
shall be placed upon such books; and where the 
change of ownership is by transfer of the certificate 
the stamp shall be placed upon the certificate ; and Affixing of »tamp, 
in cases of an agreement to sell or where the trans- 
fer is by delivery of the certificate assigned in 
blank there shall be made and delivered by the 
seller to the buyer a bill or memorandum of such 
sale, to which the stamp shall be affixed ; and every 
bill or memorandum of sale or agreement to sell 

179 



Schedule A 
following Sec. 1107 



Penalty 



Produce exchange 
sales 



Affixing of stamps 



REVENUE ACT OF 1921 

before mentioned shall show the date thereof, the 
name of the seller, the amount of the sale, and the 
matter or thing to which it refers. Any person 
liable to pay the tax as herein provided, or anyone 
who acts in the matter as agent or broker for such 
person, who makes any such sale, or who in pursu- 
ance of any such sale delivers any certificate or 
evidence of the sale of any stock, interest or right 
or bill or rnemorandum thereof, as herein required, 
without having the proper stamps afBxed thereto 
with intent to evade the foregoing provisions, shall 
be deemed guilty of a misdemeanor, and upon con- 
viction thereof shall pay a fine of not exceeding 
$i,ooo, or be imprisoned not more than six months, 
or both. 

4. Produce, sales of, on exchange : Upon each 
sale, agreement of sale, or agreement to sell (not 
including so-called transferred or scratch sales), 
any products or merchandise at, or under the rules 
or usages of, any exchange, or board of trade, or 
other similar place, for future delivery, for each 
$100 in value of the merchandise covered by said 
sale or agreement of sale or agreement to sell, 2 
cents, and for each additional $100 or fractional 
part thereof in excess of $100, 2 cents: Provided, 
That on every sale or agreement of sale or agree- 
ment to sell as aforesaid there shall be made and 
delivered by the seller to the buyer a bill, mem- 
orandum, agreement, or other evidence of such 
sale, agreement of sale, or agreement to sell, to 
which there shall be afBxed a lawful stamp or 
stamps in value equal to the amount of the tax on 
such sale: Provided further, That sellers of com- 
modities described herein, having paid the tax pro- 
vided by this subdivision, may transfer such con- 

180 



Schedule A 
following Sec. 1107 
STAMP TAXES 

tracts to a clearing-house corporation or associa- J,;^';?^^"ouse 
tion, and such transfer shall not be deemed to be a 
sale, or agreement of sale, or an agreement to sell 
within the provisions of this Act, provided that 
such transfer shall not vest any beneficial interest 
in such clearing-house association but shall be 
made for the sole purpose of enabling such clear- 
ing-house association to adjust and balance the 
accounts of the members of such clearing-house 
association on their several contracts. Every such 
bill, memorandum, or other evidence of sale or 
agreement to sell shall show the date thereof, the 
name of the seller, the amount of the sale, and the 
matter or thing to which it refers; and any person 
liable to pay the tax as herein provided, or anyone 
who acts in the matter as agent or broker for such 
person, who makes any such sale or agreement of 
sale, or agreement to sell, or who, in pursuance of 
any such sale, agreement of sale, or agreement to 
sell, delivers any such products or merchandise 
without a bill, memorandum, or other evidence 
thereof as herein required, or who delivers such 
bill, memorandum, or other evidence of sale, or 
agreement to sell, without having the proper 
stamps affixed thereto, with intent to evade the afore- Penalty 
going provisions, shall be deemed guilty of a mis- 
demeanor, and upon conviction thereof shall pay a 
fine of not exceeding $i,ooo or be imprisoned not 
more than six months, or both. 

No bill, memorandum, agreement, or other evi- fuwelttot""' 
dence of such sale, or agreement of sale, or agree- 
ment to sell, in case of cash sales of products or 
merchandise for immediate or prompt delivery 
which in good faith are actually intended to be de- 
livered shall be subject to this tax. 

i8i 



Schedule A 
following Sec. 1107 



Drafts, checks* 
promissory notes 



Exceptions 



ConveyanceSt 
deeds, etc. 



Customhouse 
entries 



REVENUE ACT OF 1921 

This subdivision shall not affect but shall be in 
addition to the provisions of the "United States 
cotton futures Act," approved August ii, 1916, as 
amended, and "The Future Trading Act," ap- 
proved August 24, 1 921. 

5. Drafts or checks (payable otherwise than at 
sight or on demand) upon their acceptance or de- 
livery within the United States whichever is prior, 
promissory notes, except bank notes issued for cir- 
culation, and for each renewal of the same, for a 
sum not exceeding $100, 2 cents; and for each 
additional $100, or fractional part there of, 2 cents. 

This subdivision shall not apply to a promissory 
note secured by the pledge of bonds or obligations 
of the United States issued after April 24, 1917, or 
secured by the pledge of a promissory note which 
itself is secured by the pledge of such bonds or ob- 
ligations: Provided, That in either case the par 
value of such bonds or obligations shall be not less 
than the amount of such note. 

6. Conveyances : Deed, instrument, or writing, 
whereby any lands, tenements, or other realty sold 
shall be granted, assigned, transferred, or otherwise 
conveyed to, or vested in, the purchaser or pur- 
chasers, or any other person or persons, by his, her, 
or their direction, when the consideration or value 
of the interest or property conveyed, exclusive of 
the value of any lien or encumberance remaining 
thereon at the time of sale exceeds $100 and does 
not exceed $500, 50 cents ; and for each additional 
$500 or fractional part thereof, 50 cents. This sub- 
division shall not apply to any instrument or writ- 
ing given to secure a debt. 

7. Entry of any goods, wares, or merchandise at 
any customhouse, either for consumption or ware- 

182 



Schedule A 
following Sec. 1107 
STAMP TAXES 

housing, not exceeding $ido in value, 25 cents; ex- 
ceeding $100 and not exceeding $500 in value, 50 
cents; exceeding $500 in value, $1. 

8. Entry for the w^ithdrawal of any eoods or withdrawal from 

■; JO custonrifi 

merchandise from customs bonded w^arebouse, 50 
cents. 

9. Passage ticket, one way or round trip, for Pa.»age ticket, 
each passenger, sold or issued in the United States 

for passage by any vessel to a port or place not in 
the United States, Canada, or Mexico, if costing 
not exceeding $30, $1 ; costing more than $30 and 
not exceeding $60, $3 ; costing more than $60, $5. 
This subdivision shall not apply to passage tickets 
costing $10 or less. 

10. Proxy for voting at any election for officers. Proxies 
or meeting for the transaction of business, of any 
corporation, except religious, educational, charit- 
able, fraternal, or literary societies, or public cem- 
eteries, 10 cents. 

11. Power of attorney granting authority to do Power of attorney 
or perform some act for or in behalf of the grantor, 

which authority is not otherwise vested in the 
grantee, 25 cents. This subdivision shall not apply 
to any papers necessary to be used for the collection 
of claims from the United States or from any State 
for pensions, back pay, bounty, or for property 
lost in the military or naval service, nor to powers 
of attorney required in bankruptcy cases nor to 
powers of attorney contained in the application of 
those who become members of or policy holders in 
mutual insurance companies doing business on the 
inter-insurance or reciprocal indemnity plan 
through an attorney in fact. 

183 



Schedule A 
following Sec. 1107 



Playing cards 



I nsurance policies 
and binders 



Reinsurance 
policies exempt 



Affixing of stamps 
and penalty 



REVENUE ACT OF 1921 

12. Playing cards: Upon every pack of playing 
cards containing not more than fifty-four cards, 
manufactured or imported, and sold, or removed 
for consumption or sale, a tax of 8 cents per pack. 

13. On each policy of insurance, or certificate, 
binder, covering note, memorandum, cablegram, 
letter, or other instrument by whatever name called 
whereby insurance is made or renewed upon prop- 
erty within the United States (including rents and 
profits) against peril by sea or on inland waters or 
in transit on land (including transshipments and 
storage at termini or way points) or by fire, light- 
ning, tornado, wind-storm, bombardment, invasion, 
insurrection or riot, issued to or for or in the name 
of a domestic corporation or partnership or an 
individual resident of the United States by any 
foreign corporation or partnership or any individ- 
ual not a resident of the United States, when such 
policy or other instrument is not signed or counter- 
signed by an officer or agent of the insurer in a 
State, Territory, or District of the United States 
within which such insurer is authorized to do bus- 
iness, a tax of 3 cents on each dollar, or fractional 
part thereof of the premium charged: Provided, 
That policies of reinsurance shall be exempt from 
the tax imposed by this subdivision. 

Any person to or for whom or in whose name any 
such policy or other instrument is issued, or any 
solicitor or broker acting for or on behalf of such 
person in the procurement of any such policy or 
other instrument, shall affix the proper stamps to 
such policy or other instrument, and for failure to 
affix such stamps with intent to evade the tax shall, 
in addition to other penalties provided therefor, 
pay a fine of double the amount of the tax. 

184 



Sec. 1200 
EMPLOYMENT OF CHILD LABOR 

Title XII. — Tax on Employment of Child 

Labor. 

Sec. 1 200. That every person (other than a ItMiduS^"" 
bona fide boys' or girls' canning club recognized 
by the Agricultural Department of a State and of 
the United States) operating (a) any mine or 
quarry situated in the United' States in which 
children under the age of sixteen years have been 
employed or permitted to work during any portion 
of the taxable year ; or (b) any mill, cannery, work- 
shop, factory, or manufacturing establishment sit- 
uated in the United States in which children under 
the age of fourteen years have been employed or 
permitted to work, or children between the ages 
of fourteen and sixteen have been employed or per- 
mitted to work more than eight hours in any day or 
more than six days in any week, or after the hour of 
seven o'clock post meridian, or before the hour of 
six o'clock ante meridian, during any portion of 
the taxable year, shall pay for each taxable year, in 
addition to all other taxes imposed by law (but in 
lieu of the tax imposed by section 1200 of the Rev- 
enue Act of 1918), an excise tax equivalent to 10 R«'=°ft" 
per centum of the entire net profits received or 
accrued for such year from the sale or disposition 
of the product of such mine, quarry, mill, cannery, 
workshop, factory, or manufacturing establish- 
ment. 

Sec. 1 201. That in computing net profits under ^°t"l>™fit8'°" "' 
the provisions of this title, for the purpose of the 
tax there shall be allowed as deductions from the 
gross amount received or accrued for the taxable 
year from the sale or disposition of such products 
manufactured within the United States the follow- 
ing items : 

185 



Sec. 1202 



Deductions 

(a), (b),(c),(d),(e) 



Sale of child labor 
product at less than 
fair market value 



REVENUE ACT OF 1921 

(a) The cost of raw materials entering into the 
production; 

(b) Running expenses, including rentals, cost of 
repairs, and maintenance, heat, power, insurance, 
management, and a reasonable allowance for sal- 
aries or other compensations for personal services 
actually rendered, and for depreciation; 

(c) Interest paid within the taxable year on 
debts or loans contracted to meet the needs of the 
business, and the proceeds of which have been 
actually used to meet such needs ; 

(d) Taxes of all kinds paid during the taxable 
year with respect to the business or property re- 
lating to the production ; and 

(e) Losses actually sustained within the taxable 
year in connection with the business of producing 
such products, including losses from fire, flood, 
storm, or other casualties, and not compensated 
for by insurance or otherwise. 

Sec. 1202. That if any such person during any 
taxable year or part thereof, whether under any 
agreement, arrang'ement, or understanding or 
otherwise, sells or disposes of any product of such 
mine, quarry, mill, cannery, workshop, factory, or 
manufacturing establishment at less than the fair 
market price obtainable therefor either (a) in such 
manner as directly or indirectly to benefit such 
person or any person directly or indirectly interest- 
ed in the business of such person; or (b) with in- 
tent to cause such benefit; the gross amount re- 
ceived or accrued for such year or part thereof 
from the sale or disposition of such product shall 
be taken to be the amount which would have been 



Sec. 1203 

TAX ON EMPLOYMENT OF CHILD LABOR 

received or accrued from the sale or disposition of 
such product if sold at the fair market price. 

Sec. 1203. (^) That no person subject to the ^^Xuyfor'fnUe 
provisions of this title shall be liable for the tax "«'en«=nf 
herein imposed if the only employment or per- 
mission to work which but for this section would 
subject him to the tax has been of a child as to whom 
such person has in good faith procured at the time 
of employing such child or permitting him to 
work, and has since in good faith relied upon and 
kept on file a certificate, issued in such form, under 
such conditions and by such persons as may be pre- 
scribed by a board consisting of the Secretary, the 
Commissioner, and the Secretary of Labor, show- 
ing the child to be of such age as not to subject 
such person to the tax imposed by this title. Any 
person who knowingly makes a false statement or 
presents false evidence in or in relation to any such 
certificate or application therefor shall be punished 
by a fine of not less than $100, nor more than $1,000, 
or by imprisonment for not more than three 
months, or by both such fine and imprisonment, in 
the discretion of the court. 

In any State designated by such board an em- Employment 

-' <=> -' certificate 

ployment certificate or other similar paper as to 
the age of the child, issued under the laws of that 
State, and not inconsistent with the provisions of 
this title, shall have the same force and effect as a 
certificate herein provided for. 

(b) The tax imposed by this title shall not be J^'f 'j'yJhiid' " 
imposed in the case of any person who proves to 
the satisfaction of the Secretary that the only em- 
ployment or permission to work which but for this 
section would subject him to the tax, has been of a 
child employed or permitted to work under; a 

187 



Sees. 1204-1206 



Returns by 
employer of child 
labor 



Tax due 



Inspection 
authorized 



REVENUE ACT OF 1921 

mistake of fact as to the age of such child, and 
without intention to evade the tax. 

Sec. 1 204. That on or before the first day of the 
third month following the close of each taxable 
year, a true and accurate return under oath shall 
be made by each person subject to the provisions 
of this title to the collector for the district in which 
such person has his principal office or place of 
business, in such form as the Commissioner, with 
the approval of the Secretary, shall prescribe, set- 
ting forth specifically the gross amount of income 
received or accrued during such year from the sale 
or disposition of the product of any mine, quarry, 
mill, cannery, workshop, factory, or manufacturing 
establishment, in which children have been em- 
ployed subjecting him to the tax imposed by this 
title, and from the total thereof deducting the 
aggregate items of allowance authorized by this 
title, and such other particulars as to the gross 
receipts and items of allowance as the Commis- 
sioner, with the approval of the Secretary, may re- 
quire. 

Sec. 1205. That all such returns shall be trans- 
mitted forthwith by the collector to the Commis- 
sioner, who shall, as soon as practicable, assess the 
tax found due and notify the person making such 
return of the amount of tax for which such person 
is liable, and such person shall pay the tax to the 
collector on or before thirty days from the date of 
such notice. 

Sec. 1206. That for the purposes of this Act 
the Commissioner, or any person duly authorized 
by him, shall have authority to enter and inspect 
at any time any mine, quarry, mill, cannery, work- 



Sees. 1207, 1300, 1301 

GENERAL ADMINISTRATIVE PROVISIONS 

shop, factory, or manufacturing establishment 
The Secretary of Labor, or any person duly author- 
ized by him, shall, for the purpose of complying 
with a request of the Commissioner to make such 
an inspection, have like authority, and shall make 
report to the Commissioner of inspections made 
under such authority in such form as may be pre- 
scribed by the Commissioner with the approval of 
the Secretary of the Treasury. 

Any person who refuses or obstructs entry or in- obrtructfon 
spection authorized by this section shall be pun- "'"•^p'""'" 
ished by a fine of not more than $i,ooo, or by im- 
prisonment for not more than one year, or both. 

Sec. 1207. That as used in this title the term jJii"^""""" 
"taxable year" shall have the same meaning as 
provided for the purposes of income tax in sec- 
tion 200. 

Title XIII. — General Administrative 
Provisions. 

Laws Made Applicable. 
Sec. I ^00. That all administrative, special, or Extensions of 

•J 1 r 1 previous laws and 

stamp provisions of law, including the law relating "s^Ja"""" 
to the assessment of taxes, so far as applicable, are 
hereby extended to and made a part of this Act, 
and every person liable to any tax imposed by this 
Act, or for the collection thereof, shall keep such 
records and render, under oath, such statements 
and returns, and shall comply with such regula- 
tions as the Commissioner, with the approval of the 
Secretary, may from time to time prescribe. 

Method of Collecting Tax. 

Sec. 1 30 1. That whether or not the method of 2Jii*?i°'tax- 
collecting any tax imposed by Titles V, VI, VII, ^ir^'^trioner'" 

189 



Sec. 1302 



Penalties 
for failure 



Penalties 
for willful 
violation 



REVENUE ACT OF 1921 

VIII, I'X, or X of this Act is specifically provided 
therein, any such tax may under regulations pre- 
scribed by the Commissioner with the approval of 
the Secretary, be collected by stamp, coupon, serial- 
numbered ticket, or such other reasonable device 
or method as may be necessary or helpful in secur- 
ing a complete and prompt collection of the tax. 
All administrative and penalty provisions of Title 
XI, in so far as applicable, shall apply to the col- 
lection of any tax which the Commissioner determ- 
ines or prescribes shall be collected in such manner. 

Penalties. 

Sec. 1302. (a) That any person required under 
Titles V, VI, VII, VIII, IX, X, or XII, to pay, or 
to collect, account for and pay over any tax, or re- 
quired by law or regulations made under authority 
thereof to make a return or supply any information 
for the purposes of the computation, assessment, or 
collection of any such tax, who fails to pay, collect 
or truly account for and pay over any such tax, make 
any such return or supply any such information at 
the time or times required by law or regulation shall 
in addition to other penalties provided by law be 
subject to a penalty of not more than $1,000. 

(b) Any person who willfully refuses to pay, 
collect, or truly account for and pay over any such 
tax, make such return or supply such information 
at the time or times required by law or regulation, 
or who willfully attempts in any manner to evade 
such tax, shall be guilty of a misdemeanor and in 
addition to other penalties provided by law shall 
be fined not more than $10,000 or imprisoned for 
not more than one year, or both, together with the 
costs of prosecution. 

I go 



r^ 



Sees. 1303, 1304 
GENERAL ADMINISTRATIVE PROVISIONS 

(c) Any person who willfully refuses to pay, Additional penalty 
collect, or truly account for and pay over any such 

tax shall in addition to other penalties provided by 
law be liable to a penalty of the amount of the tax 
evaded, or not paid, collected, or accounted for 
and paid over, to be assessed and collected in the 
same manner as taxes are assessed and collected: 
Provided, however, That no penalty shall be as- Exception 
sessed under this subdivision for any offense for 
which a penalty may be assessed under authority 
of section 3176 of the Revised Statutes, as amend- 
ed, or for any offense for which a penalty has been 
recovered under section 3256 of the Revised 
Statutes. 

(d) The term "person" as used in this section "Pe«on"as 

^ ' m t used in this section 

includes an officer or employee of a corporation or 
a member or employee of a partnership, who as 
such officer, employee, or member is under a duty 
to perform the act in respect of which the viola- 
tion occurs. 

Rules and Regulations. 
Sec. 1303. That the Commissioner, with the commissioner to 

t f * r\ 'ii 1*1 make rules and 

approval of the Secretary, is hereby authorized to regulation, 
make all needful rules and regulations for the en- 
forcement of the provisions of this Act. 

The Commissioner, with such approval may by 
regulation provide that any return required by 
Titles V, VI, VII, VIII, IX, or X to be under 
oath may, if the amount of the tax covered thereby 
is not in excess of $10, be signed or acknowledged 
before two witnesses instead of under oath. 

Overpayments and Overcollections. 

Sec. 1304. That in the case of any overpayment ^;;d'e^'3^c"tfon602'^' 
or overcollection of any tax imposed by section v"iiIndYx^' 

191 



Sees. 1305-1307 



REVENUE ACT OF 1921 

602 or by Title V, Title VIII, or Title IX, the 
person making such overpayment or overcoUection 
may take credit therefor against taxes due upon 
any monthly return, and shall make refund of any 
excessive amount collected by him upon proper 
application by the person entitled thereto. 



Exports exempted 
and refunds of tax 
therefor 



Articles Exported. 

Sec. 1305. That under such rules and regula- 
tions as the Commissioner with the approval of the 
Secretary may prescribe, the taxes imposed under 
the provisions of Titles VI, VII or IX shall not 
apply in respect to articles sold or leased for ex- 
port and in due course so exported. Under such 
rules and regulations the amount of any internal- 
revenue tax erroneously or illegally collected in 
respect to exported articles may be refunded to 
the exporter of the article, instead of to the manu- 
facturer, if the manufacturer waives any claim for 
the amount so to be refunded. 



Fractions of cent 
in tax 



Special returns and 
statements may 
be required 



Fractional Parts of a Cent. 

Sec. 1 306. That in the payment of any tax under 
this Act not payable by stamp a fractional part of 
a cent shall be disregarded unless it amounts to one- 
half cent or more, in which case it shall be increased 
to I cent. 

Returns. 

Sec. 1307. That whenever in the judgment of 
the Commissioner necessary he may require any 
person, by notice served upon him, to make a re- 
turn or such statements as he deems sufficient to 
show whether or not such person is liable to tax. 

192 



Sees. 1308-1310 

GENERAL ADMINISTRATIVE PROVISIONS 

Examination of Books and Witnesses. 

Sec. 1 308. That the Commissioner, for the pur- STamTrirbookLrnl 
pose of ascertaining the correctness of any return """*'"" 
or for the purpose of making a return where none 
has been made, is hereby authorized, by any rev- 
enue agent or inspector designated by him for that 
purpose, to examine any books, papers, records, or 
memoranda bearing upon the matters required to 
be included in the return, and may require the 
attendance of the person rendering the return or of 
any officer or employee of such person, or the at- 
tendance of any other person having knowledge 
in the premises, and may take his testimony with 
reference to the matter required by law to be in- 
cluded in such return, with power to administer 
oaths to such person or persons. 

Unnecessary Examinations. 

Sec. 1309. That no taxpayer shall be subjected uSe^^VTa""" 
to unnecessary examinations or investigations, and "''"* 
only one inspection of a taxpayer's books of account 
shall be made for each taxable year unless the tax- 
payer requests otherwise or unless the Commission- 
er, after investigation, notifies the taxpayer in 
writing that an additional inspection is necessary. 

Jurisdiction of Courts. 

Sec. 1310. (a) That if any person is summoned un"ted'sto?ea' 
under this Act to appear, to testify, or to produce d^lh) aUo) 
books, papers or other data, the district court of 
the United States for the district in which such 
person resides shall have jurisdiction by appropri- 
ate process to compel such attendance, testimony, 
or production of books, papers, or other data. 

193 



Sec. 1311 



Section 24 of 
Judicial Code 
amended 



Revised Statutes 
reenacted 



REVENUE ACT OF 1921 

(b) The district courts of the United States at the 
instance of the United States are hereby invested 
with such jurisdiction to make and issue, both in 
actions at law and suits in equity, writs and orders 
of injunction, and of ne exeat republica, orders 
appointing receivers, and such other orders and 
process, and to render such judgments and decrees, 
granting in proper cases both legal and equitable 
relief together, as may be necessary or appropriate 
for the enforcement of the provisions of this Act. 
The remedies hereby provided are in addition to 
and not exclusive of any and all other remedies of 
the United States in such courts or otherwise to 
enforce such provisions. 

(c) Paragraph Twentieth of section 24 of the 
Judicial Code is amended by adding at the end 
thereof the following new paragraph : 

"Concurrent with the Court of Claims, of any 
suit or proceeding, commenced after the passage 
of the Revenue Act of 1921, for the recovery of 
any internal-revenue tax alleged to have been er- 
roneously or illegally assessed or collected, or of 
any penalty claimed to have been collected without 
authority or any sum alleged to have been ex- 
cessive or in any manner wrongfully collected, 
under the internal-revenue laws, even if the claim 
exceeds $10,000, if the collector of internal-revenue 
by whom such tax, penalty, or sum was collected 
is dead at the time such suit or proceeding is com- 
menced." 

Amendments to Revised Statutes. 

Sec. 131 1. That sections 3164, 3165, 3167, 3172, 
3173, and 3176 of the Revised Statutes, as amend- 
ed, are reenacted, without change, as follows : 

194 



Sec. 1311 

GENERAL ADMINISTRATIVE PROVISIONS 

"Sec. 3164. It shall be the duty of every collector f^ftr^^ifon!; 
of internal revenue having knowledge of any will- ^f woiauon.' 
ful violation of any law of the United States re- 
lating to the revenue, within thirty days after com- 
ing into possession of such knowledge, to file with 
the district attorney of the district in which any 
fine, penalty, or forfeiture may be incurred, a 
statement of all the facts and circumstances of the 
case within his knowledge, together with the names 
of the witnesses, setting forth the provisions of law 
believed to be so violated on which reliance may be 
had for condemnation or conviction. 

"Sec. 3165. Every collector, deputy collector, ^i^j^tsirl'tlon of 
internal-revenue agent, and internal-revenue officer "^'i'agen"""""' 
assigned to duty under an internal-revenue agent, is 
authorized to administer oaths and to take evidence 
touching any part of the administration of the in- 
ternal-revenue laws with which he is charged, or 
where such oaths and evidence are authorized by 
law or regulation authorized by law to be taken. 

"Sec. 3167. It shall be unlawful for any col- Su!io^u;e"ffact= 
lector, deputy collector, agent, clerk, or other of- ""'"p""^"'' 
ficer or employee of the United States to divulge 
or to make known in any manner whatever not pro- 
vided by law to any person the operations, style of 
work, or apparatus of any manufacturer or pro- 
ducer visited by him in the discharge of his official 
duties, or the amount or source of income, profits, 
losses, expenditures, or any particular thereof, set 
forth or disclosed in any income return, or to per- 
mit any income return or copy thereof or any book 
containing any abstract or particulars thereof to 
be seen or examined by any person except as pro- 
vided by law, and it shall be unlawful for any per- 
son to print or publish in any manner whatever 

195 



Sec. 1311 



R. S. Sec. 3172, 
Collector to list 
taxable persons 



R. S. Sec. 3173, 
Filing of returns 
not specially 
provided for in Act 



REVENUE ACT OF 1921 

not provided by law any income return, or any part 
thereof or source of income, profits, losses, or ex- 
penditures appearing in any income return; and 
any offense against the foregoing provision shall be 
a misdemeanor and be punished by a fine not ex- 
ceeding $i,ooo or by imprisonment not exceeding 
one year, or both, at the discretion of the court; 
and if the offender be an officer or employee of 
the United States he shall be dismissed from office 
or discharged from employment. 

"Sec. 3172. Every collector shall, from time to 
time, cause his deputies to proceed through every 
part of his district and inquire after and concerning 
all persons therein who are liable to pay any in- 
ternal-revenue tax, and all persons owning or hav- 
ing the care and management of any objects liable 
to pay any tax, and to make a list of such persons 
and enumerate said objects. 

"Sec. 3173. It shall be the duty of any person, 
partnership, firm, association, or corporation, made 
liable to any duty, special tax or other tax imposed 
by law, when not otherwise provided for (i) in 
case of a special tax, on or before the thirty-first day 
of July in each year, and (2) in other cases before 
the day on which the taxes accrue, to make a list or 
return, verified by oath, to the collector or a deputy 
collector of the district where located, of the articles 
or objects, including the quantity of goods, wares, 
and merchandise, made or sold and charged with 
a tax, the several rates and aggregate amount, ac- 
cording to the forms and regulations to be pre- 
scribed by the Commissioner of Internal Revenue, 
with the approval of the Secretary of the Treasury, 
for which such person, partnership, firm, associ- 
ation, or corporation is liable : Provided, That if 

196 



Sec. 1311 



GENERAL ADMINISTRATIVE PROVISIONS 



examine 
witnesses 



any person liable to pay any duty or tax, or owning, 
possessing, or having the care or management of 
property, goods, wares, and merchandise, article or 
objects liable to pay any duty, tax, or license, shall 
fail to make and exhibit a list or return required by 
law, but shall consent to disclose the particulars 
of any and all the property, goods, wares, and mer- 
chandise, articles, and objects liable to pay any 
duty or tax, or any business or occupation liable 
to pay any tax as aforesaid, then, and in that case, 
it shall be the duty of the collector or deputy col- Sl^^JvlTnand 
lector to make such list or return, which, being 
distinctly read, consented to, and signed and veri- 
fied by oath by the person so owning, possessing, 
or having the care and management as aforesaid, 
may be received as the list of such person : Provided 
further, That in case no annual list or return has 
been rendered by such person to the collector or 
deputy collector as acquired by law, and the person 
shall be absent from his or her residence or place 
of business at the time the collector or a deputy 
collector shall call for the annual list or return, it 
shall be the duty of such collector or deputy collect- 
or to leave at such place of residence or business, 
with some one of suitable age and discretion, if 
such be present, otherwise to deposit in the nearest 
post ofRce, a note or memorandum addressed to 
such person requiring him or her to render to such 
collector or deputy collector the list or return re- 
quired by law within ten days from the date of such 
note or memorandum, verified by oath. And if any 
person, on being notified or required as aforesaid, 
shall refuse or neglect to render such list or return 
within the time required as aforesaid, or whenever 
any person who is required to deliver a monthly or 
other return of objects subject to tax fails to do so 

197 



Sec. 1311 



Collector may 
proceed outside 
his district 



'Person* as used 
in this section 
includes 
corporation, etc. 



R. S. Sec. 3176, 
Collector to make 
return where none 
ia filed 



REVENUE ACT OF 1921 

at the time required, or delivers any return which, 
in the opinion of the collector, is erroneous, false, 
or fraudulent, or contains any undervaluation or 
understatement, or refuses to allow any regularly 
authorized Government officer to examine the 
books of such person, firm, or corporation, it shall 
be lawful for the collector to summon such person, 
or any other person having possession, custody, or 
care of books of account containing entries relating 
to the business of such person or any other person he 
may deem proper, to appear before him and pro- 
duce such books at a time and place named in the 
summons, and to give testimony or answer inter- 
rogatories, under oath, respecting any objects or 
income liable to tax or the returns thereof. The 
collector may summon any person residing or found 
within the State or Territory in which his district 
lies ; and when the person intended to be summoned 
does not reside and can not be found within such 
State or Territory, he may enter any collection dis- 
rict where such person may be found and there 
make the examination herein authorized. And to 
this end he may there exercise all the authority 
which he might lawfully exercise in the district for 
which he was commissioned : Provided, That 'per- 
son,' as used in this section, shall be construed to 
include any corporation, joint-stock company or 
association or insurance company when such con- 
struction is necessary to carry out its provisions. 

"Sec. 3176. If any person, corporation, com- 
pany, or association fails to make and file a return 
or list at the time prescribed by law or by regula- 
tion made under authority of law, or makes, will- 
fully or otherwise, a false or fraudulent return or 
list, the collector or deputy collector shall make 

198 



Sec. 1311 

GENERAL ADMINISTRATIVE PROVISIONS 

the return or list from his own knowledge and from 
such information as he can obtain through testi- 
mony or otherwise. In any such case the Com- 
missioner may, from his own knowledge and from 
such information as he can obtain through testi- 
mony or otherwise, make a return or amend any 
return made by a collector or deputy collector. 
Any return or list so made and subscribed by the 
Commissioner, or by a collector or deputy collector 
and approved by the Commissioner, shall be prima 
facie good and sufficient for all legal purposes. 

"If the failure to file a return or list is due to ^"^^^^foJ^y" 
sickness or absence, the collector may allow such =''*^""°" 
further time, not exceeding thirty days, for making 
and filing the return or list as he deems proper. 

"The Commissioner of Internal Revenue shall S'^^i^autLes 
determine and assess all taxes, other than stamp «>'«?""»'"?'-''" 
taxes, as to which returns or lists are so made 
under the provisions of this section. In case of any 
failure to make and file a return or list within the 
time prescribed by law, or prescribed by the Com- 
missioner of Internal Revenue or the collector in 
pursuance of law, the Commissioner of Internal 
Revenue shall add to the tax 25 per centum of its 
amount, except that when a return is filed after 
such time and it is shown that the failure to file it Penalty for wuifui 

neglect to hie 

was due to a reasonable cause and not to willful "auduUntVeTum 
neglect, no such addition shall be made to the tax. 
In case a false or fraudulent return or list is will- 
fully made, the Commissioner of Internal Revenue 
shall- add to the tax 50 per centum of its amout. 

"The amount so added to any tax shall be col- of'p^nal'ty 
lected at the same time and in the same manner and 
as a part of the tax unless the tax has been paid be- 

199 



Sees. 1312, 1313 



REVENUE ACT OF 1921 

fore the discovery of the neglect, falsity, or fraud, 
in which case the amount so added shall be collect- 
ed in the same manner as the tax." 



Final determination 
and assessment 
under agreement 



Final Determinations and Assessments. 

Sec. 1 3 12. That if after a determination and 
assessment in any case the taxpayer has without 
protest paid in whole any tax or penalty, or accept- 
ed any abatement, credit, or refund based on such 
determination and assessment, and an agreement is 
made in writing between the taxpayer and the 
Commissioner, with the approval of the Secretary, 
that such determination and assessment shall be 
final and conclusive, then (except upon a showing 
of fraud or malfeasance or misrepresentation of fact 
materially affecting the determination or assessment 
thus made) (i) the case shall not be reopened or 
the determination and assessment modified by any 
officer, employee, or agent of the United States, and 
(2) no suit, action, or proceeding to annul, modify, 
or set aside such determination or assessment shall 
be entertained by any court of the United States. 



Administrative 
Review 



Administrative Review. 

Sec, 13 13. That in the absence of fraud or 
mistake in mathematical calculation, the findings 
of facts in and the decision of the Commissioner 
upon (or in case the Secretary is authorized to 
approve the same, then after such approval the 
merits of any claim presented under or authorized 
by the internal-revenue laws shall not be subject 
to review by any other administrative officer, em- 
ployee, or agent of the United States. 

200 



Sees. 1314, 1315 

GENERAL ADMINISTRATIVE PROVISIONS 

Retroactive Regulations. 

Sec. 1 3 14. That in case a regulation or Treas- ^^lf:i'l „^v.. 
ury decision relating to the internal-revenue laws nX-'reiMctive 
made by the Commissioner or the Secretary, or by 
the Commissioner with the approval of the Sec- 
retary, is reversed by a subsequent regulation or 
Treasury decision, and such reversal is not im- 
mediately occasioned or required by a decision of 
a court of competent jurisdiction, such subsequent 
regulation or Treasury decision may, in the dis- 
cretion of the Commissioner, with the approval of 
the Secretary, be applied without retroactive effect. 



Refunds. 

Sec. 13 15. That section 3220 of the Revised 
Statutes, as amended, is reenacted without change, 
as follows : 

"Sec. 3220. The Commissioner of Internal 
Revenue, subject to regulations prescribed by the 
Secretary of the Treasury, is authorized to remit, 
refund, and pay back all taxes erroneously or il- 
legally assessed or collected, all penalties collected 
without authority, and all taxes that appear to be 
unjustly assessed or excessive in amount, or in any 
manner wrongfully collected; also to repay to any 
collector or deputy collector the full amount of 
such sums of money as may be recovered against 
him in any court, for any internal revenue taxes 
collected by him, with the cost and expenses of suit; 
also all damages and costs recovered against any 
assessor, assistant assessor, collector, deputy collect- 
or, agent, or inspector, in any suit brought against 
him by reason of anything done in the due per- 
formance of his official duty, and shall make report 

201 



Refunds 



Sees. 1316, 1317 



Claims for 
refund within 
four years 
of payment 



Refund provisions 
retroactive 



Secretary to 
estimate an 
appropriation 
for refunds 



REVENUE ACT OF 1921 

to Congress at the beginning of each regular session 
of Congress of all transactions under this section." 

Sec. 1 316. That section 3228 of the Revised 
Statutes is amended to read as follows : 

"Sec. 3228. All claims for the refunding or 
crediting of any internal revenue tax alleged to 
have been erroneously or illegally assessed or col- 
lected, or of any penalty alleged to have been col- 
lected w^ithout authority, or of any sum alleged to 
have been excessive or in any manner w^rongfully 
collected, must be presented to the Commissioner 
of Internal Revenue w^ithin four years next after 
payment of such tax, penalty, or sum." 

This section, except as modified by section 252, 
shall apply retroactively to claims for refund under 
the Revenue Act of 1 9 1 6, the Revenue Act of 1 9 1 7, 
and the Revenue Act of 191 8. 

Sec. 1 3 17. That the paragraph of section 3689 
of the Revised Statutes, as amended, reading as 
follows: "Refunding taxes illegally collected (in- 
ternal revenue) : To refund and pay back duties 
erroneously or illegally assessed or collected under 
the internal revenue laws," is repealed from and 
after June 30, 1920;- and the Secretary 'of the 
Treasury shall submit for the fiscal year 1921, and 
annually thereafter, an estimate of appropriations 
to refund and pay back duties or taxes erroneously 
or illegally assessed or collected under the internal- 
revenue laws, and to pay judgments, including 
interest and costs, rendered for taxes or penalties 
erroneously or illegally assessed or collected under 
the internal-revenue laws. 



202 



Sees. 1318-1320 
GENERAL ADMINISTRATIVE PROVISIONS 
Limitations Upon Suits and Prosecutions. 

Sec. 13 1 8. That section 3226 of the Revised 
Statutes is amended to read as follows: 

"Sec. 3226. No suit or proceeding shall be [^ZHtctVlue'Z 
maintained in any court for the recovery of any «i5«'y »''"«• 
internal-revenue tax alleged to have been errone- 
ously or illegally assessed or collected, or of any 
penalty claimed to have been collected without 
authority, or of any sum alleged to have been ex- 
cessive or in any manner wrongfully collected, 
until a claim for refund or credit has been duly 
filed with the Commissioner of Internal Revenue, 
according to the provisions of law in that regard, 
and the regulations of the Secretary of the Treas- 
ury established in pursuance thereof. No such suit 
or proceeding shall be begun before the expiration 
of six months from the date of filing such claim 
unless the Commissioner renders a decision thereon 
within that time, nor after the expiration of five 
years from the date of the payment of such tax, 
penalty, or sum." 

This section shall not affect any suit or proceed- 
ing instituted prior to the passage of this Act, but 
shall apply to all suits and proceedings instituted 
after the passage of this Act, whether or not barred 
by prior Acts of Congress. 

Sec. 1 3 19. That section 3227 of the Revised fe^J^T^'" 
Statutes is hereby repealed but such repeal shall 
not affect any suit or proceeding instituted prior 
to the passage of this Act. 

Sec. 1320. That no suit or proceeding for the Limitation of time 

^ * J^ within which to sue 

collection of any internal revenue tax shall be begun '^j;"""'^'''" °* 
after the expiration of five years from the time such 

203 



Sec. 1321 



Act of July 5, 1884, 
amended 



Indictment for 
violations 



REVENUE ACT OF 1921 

tax was due, except in the case of fraud with intent 
to evade tax, or willful attempt in any manner to 
defeat or evade tax. This section shall not apply 
to suits or proceedings for the collection of taxes 
under section 250 of this Act, nor to suits or pro- 
ceedings begun at the time of the passage of this 
Act. 

Sec. 1321. (a) That the Act entitled "An Act 
to limit the time within which prosecutions may be 
instituted against persons charged with violating 
internal-revenue laws," approved July 5, 1884, is 
amended to read as follows : 

"That no person shall be prosecuted, tried, or pun- 
ished for any of the various offenses arising under 
the internal-revenue laws of the United States un- 
less the indictment is found or the information in- 
stituted within three years next after the commis- 
sion of the offense : Provided, That the time during 
which the person committing the offense is absent 
from the district wherein the same is committed 
shall not be taken as any part of the time limited 
by law for the commencement of such proceedings : 
Provided further, That the provisions of this Act 
shall not apply to offenses committed prior to its 
passage : Provided further, That where a complaint 
shall be instituted before a commissioner of the 
United States within the period above limited, the 
time shall be extended until the discharge of the 
grand jury at its next session within the district: 
And provided further, That this Act shall not 
apply to offenses committed by officers of the 
United States." 

p;«:c'^ucfns''£egun (b) Any prosccutiou or proceeding under an 
prior to thi. Act indictment found or information instituted prior 

204 



date 



Sees. 1322-1324 

GENERAL ADMINISTRATIVE PROVISIONS 

to the passage of this Act shall not be affected in 
any manner by this amendment, but such pros- 
ecution or proceeding shall be subject to the limit- 
ations imposed by law prior to the passage of this 
Act. 

Assessments. 

Sec. 1322. That all internal revenue taxes, ex- tye^Tafter'^ue'" 
cept as provided in section 250 of this Act, shall, 
notwithstanding the provisions of section 3182 of 
the Revised Statutes or any other provision of law, 
be assessed within four years after such taxes be- 
came due, but in the case of fraud with intent to 
evade tax or willful attempt in any manner to defeat 
or evade tax, such tax may be assessed at any time. 

Fraudulent Returns. 
Sec. 1323. That section 322 c of the Revised seT3225, af "''° 

_ /-I xT'im ^ -J 11' amended, re-enacted 

Statutes of the United States, as amended, is re- 
enacted without change as follows: 

"Sec. 3225. When a second assessment is made unuffrfuduient 

r ■%•... . . i'i- intent is disproved 

in case of any list, statement, or return, which in 
the opinion of the collector or deputy collector was 
false or fraudulent, or contained any understate- 
ment or undervaluation, such assessment shall not 
be remitted, nor shall taxes collected under such 
assessment be refunded, or paid back, or recovered 
by any suit, unless it is proved that such list, state- 
ment, or return was not willfully false or fraud- 
ulent and did not contain any willful understate- 
ment or undervaluation." 

Interest on Refunds and Judgments. 
Sec. I-J24. (a) That upon the allowance of a interest aiwed 

•J ~ \ f * refunds and on 

claim for the refund of or credit for internal rev- "«<»"« 



on 



205 



Sec. 1325 



Section 177 of 
Judicial code 
amended 



Interest allowed on 
judgments rendered 
after passage 
of this Act 



Payment of tax 
by check and U. S. 
certificates of 
indebtedness 



REVENUE ACT OF 1921 

enue taxes paid, interest shall be allowed and paid 
upon the total amount of such refund or credit at 
the rate of one-half of i per centum per month to 
the date of such allowance, as follows : ( i ) if such 
amount was paid under a specific protest setting 
forth in detail the basis of and reasons for such pro- 
test, from the time when such tax was paid, or (2) 
if such amount was not paid under protest but pur- 
suant to an additional assessment, from the time 
such additional assessment was paid, or (3) if no 
protest was made and the tax was not paid pursuant 
to an additional assessment, from six months after 
the date of filing of such claim for refund or credit. 
The term "additional assessment" as used in this 
section means a further assessment for a tax of the 
same character previously paid in part. 

(b) Section 177 of the Judicial Code is amended 
to read as follows : 

"Sec. 177. No interest shall be allowed on any 
claim up to the time of the rendition of judgment 
by the Court of Claims, unless upon a contract 
expressly stipulating for the payment of interest, 
except that interest may be allowed in any judg- 
ment of any court rendered after the passage of 
the Revenue Act of 192 1 against the United States 
for any internal-revenue tax erroneously or illegal- 
ly assessed or collected, or for any penalty collected 
without authority or any sum which was excessive 
or in any manner wrongfully collected, under the 
internal-revenue laws." 

Payment of Taxes by Check or United States 
Securities. 

Sec. 1325. That collectors may receive, at par 
with an adjustment for accrued interest, notes or 

206 



Sees. 1326, 1327 
GENERAL ADMINISTRATIVE PROVISIONS 

certificates of indebtedness issued by the United 
States and uncertified checks in payment of income, 
war-profits and excess-profits taxes and any other 
taxes payable other than by stamp, during such 
time and under such regulations as the Commis- 
sioner, with the approval of the Secretary, shall 
prescribe; but if a check so received is not paid by 
the bank on which it is drawn the person by whom 
such check has been tendered shall remain liable 
for the payment of the tax and for all legal penal- 
ties and additions the same as if such check had not 
been tendered. 

Frauds on Purchasers. 

Sec. 1326. That whoever in connection with ^;.^^^°5e?8'rna 
the sale or lease, or ofifer for sale or lease, of any p«"»>"" 
article, or for the purpose of making such sale or 
lease makes any statement, written or oral, (i) 
intended or calculated to lead any person to believe 
that any part of the price at which such article is 
sold or leased, or offered for sale or lease, consists 
of a tax imposed under the authority of the United 
States, or (2) ascribing a particular part of such 
price to a tax imposed under the authority of the 
United States, knowing that such statement is false 
or that the tax is not so great as the portion of such 
price ascribed to such tax, shall be guilty of a mis- 
demeanor and upon conviction thereof shall be 
punished by a fine of not more than $1,000 or by 
imprisonment not exceeding one year, or both. 

Tax Simplification Board. 
Sec. 1327. (a) That there is hereby established Tax^simpUfication 
in the Department of the Treasury a board to be 
known as the "Tax Simplification Board" (here- 

207 



Sec. 1327 

REVENUE ACT OF 1921 

Board'^on«Sued iHafter lu this sectioii called the "Board"), to be 
composed as follows : 

(i) Three members who shall represent the 
public, to be appointed by the President; and 

(2) Three members who shall represent the 
Bureau of Internal Revenue and shall be officers 
or employees of the United States serving in such 
Bureau, to be appointed by the Secretary. 

(b) Any vacancy in the Board shall be filled in 
the same manner as the original appointment. The 
members representing the public shall serve with- 
out compensation except reimbursement for travel- 
ing, subsistence, and other necessary expenses in- 
curred in the performance of the duties vested in 
them by this section. The members representing 
the Bureau of Internal Revenue shall serve without 
compensation in addition to that received for their 
service in such Bureau. 

(c) The Secretary shall furnish the Board with 
such clerical assistance, quarters and stationery, 
furniture, office equipment, and other supplies as 
may be necessary for the performance of the duties 
vested in them by this section. 

(d) It shall be the duty of the Board to investi- 
gate the procedure of and the forms used by the 
Bureau in the administration of the internal rev- 
enue laws, and to make recommendations in re- 
spect to the simplifications thereof. The Board 
shall make a report to the Congress on or before 
the first Monday of December in each year. 

(e) The expenditures of the Board shall be 
paid upon vouchers approved by the Board and 
signed by the chairman thereof. For the expendi- 

208 



Sec. 1328 
GENERAL ADMINISTRATIVE PROVISIONS 

tures of the Board for the fiscal year ending June 

30, 1922, there is authorized to be appropriated, 
out of any money in the Treasury not otherwise 
appropriated, the sum of $10,000. 

(f) The board shall cease to exist December 

31, 1924. 

Consolidation of Liberty Bond Tax Exemptions, ex^^^"** '"'""* 

consolidated 

Sec. 1328. That the various Acts authorizing 
the issues of Liberty bonds are amended and sup- 
plemented as follows: 

(a) On and after January i, 1921, 4 per centum 
and 4^ per centum Liberty bonds shall be exempt 
from graduated additional income taxes, common- 
ly known as surtaxes, and excess-profits and war- 
profits taxes, now or hereafter imposed by the 
United States upon the income or profits of in- 
dividuals, partnerships, corporations or associa- 
tions, in respect to the interest on aggregate prin- 
cipal amounts thereof as follows : 

Until the expiration of two years after the date 
of the termination of the war between the United 
States and the German Government, as fixed by 
proclamation of the President, on $125,000 aggre- 
gate principal amount; and for three years more 
on $50,000 aggregate principal amount. 

(b) The exemptions provided in subdivision (a) r^X'i^n'L^eafed 
shall be in addition to the exemptions provided in '"P"' 
section 7 of the Second Liberty Bond Act, and in 

addition to the exemption provided in subdivision 
(3) of section r of the Supplement to the Second 
Liberty Bond Act in respect to bonds issued upon 
conversion of 3^ per centum bonds, but shall be in 
lieu of the exemptions provided and free from the 

209 



Sec. 1329 



REVENUE ACT OF 1921 

conditions and limitations imposed in subdivisions 
(i) and (2) of section i of the Supplement to 
Second Liberty Bond Act and in section 2 of the 
Victory Liberty Loan Act. 

Deposit of United States Bonds or Notes in Lieu 
of Surety. 

boSd"'a°I,Ii"ef; Sec. 1329. That wherever by the laws of the 

United States or regulations made pursuant thereto, 
any person is required to furnish any recognizance, 
stipulation, bond, guaranty, or undertaking, here- 
inafter called "penal bond," with surety or sureties, 
such person may, in lieu of such surety or sureties, 
deposit, as security with the official having author- 
ity to approve such penal bond, United States Lib- 
erty bonds or other bonds or notes of the United 
States in a sum equal at their par value to the 
amount of such penal bond required to be fur- 
nished, together with an agreement authorizing 
such official to collect or sell such bonds or notes so 
deposited in case of any default in the perform- 
ance of any of the conditions or stipulations of such 
penal bond. The acceptance of such United 
States bonds or notes in lieu of surety or sureties 
required by law shall have the same force and 
effect as individual or corporate sureties, or certi- 
fied checks, bank drafts, post-office money orders, 
or cash, for the penalty or amount of such penal 
bond. The bonds or notes deposited hereunder 
and such other United States bonds or notes as 
may be substituted therefor from time to time as 
such security, may be deposited with the Treasurer 
of the United States, a Federal reserve bank, or 
other depository duly designated for that purpose 
by the Secretary, which shall issue receipt therefor, 



210 



Sec. 1329 



GENERAL ADMINISTRATIVE PROVISIONS 



describing such bonds or notes so deposited. As Vur!"t^conSnu.d 
soon as security for the performance of such penal 
bond is no longer necessary, such bonds or notes 
so deposited, shall be returned to the depositor: 
Provided, That in case a person or persons supply- 
ing a contractor with labor or material as provided 
by the Act of Congress, approved February 24, 
1905 (33 Stat. 811), entitled "An Act to amend an 
Act approved August thirteenth, eighteen hundred 
and ninety-four, entitled 'An Act for the protec- 
tion of persons furnishing materials and labor 
for the construction of public works,' " shall file 
with the obligee, at any time after a default in the 
performance of any contract subject to said Acts, 
the application and affidavit therein provided, the 
obligee shall not deliver to the obligor the de- 
posited bonds or notes nor any surplus proceeds 
thereof until the expiration of the time limited by 
said Acts for the institution of suit by such person 
or persons, and, in case suit shall be instituted with- 
in such time, shall hold said bonds or notes or pro- 
ceeds subject to the order of the court having 
jurisdiction thereof : Provided further, That noth- 
ing herein contained shall affect or impair the 
priority of the claim of the United States against 
the bonds or notes deposited or any right or 
remedy granted by said Acts or by this section to 
the United States for default upon any obligation 
of said penal bond : Provided further, That all laws 
inconsistent with this section are hereby so modi- 
fied as to conform to the provisions hereof: And 
provided further, That nothing contained herein 
shall affect the authority of courts over the security 
where such bonds are taken as security in judicial 
proceedings, or the authority of any administrative 
officer of the United States to receive United 



211 



Sees. 1330, 1331 



REVENUE ACT OF 1921 



States bonds for security in cases authorized by 
existing laws. The Secretary may prescribe rules 
and regulations necessary and proper for carrying 
this section into effect. 



Revised Statues, 
Section 3315 
re-enacted 



Stamps lost 



Consolidated 
returns for 
year 1917 



Lost Stamps for Tobacco, Cigars, and so forth. 

Sec. 1330. That section 3315 of the Revised 
Statutes, as amended, is re-enacted without change, 
as follows: 

"Sec. 3315. The Commissioner of Internal 
Revenue may, under regulations prescribed by him 
with the approval of the Secretary of the Treasury, 
issue stamps for restamping packages of distilled 
spirits, tobacco, cigars, snuff, cigarettes, fermented 
liquors, and wines which have been duly stamped 
but from which the stamps have been lost or de- 
stroyed by unavoidable accident." 

Consolidated Returns for Year 1^17. 

Sec. 1 33 1, (a) That Title II of the Revenue 
Act of 1 917 shall be construed to impose the taxes 
therein mentioned upon the basis of consolidated 
returns of net income and invested capital in the 
case of domestic corporations and domestic part- 
nerships that were affiliated during the calendar 
year 1917. 

(b) For the purpose of this section a corporation 
or partnership was affiliated with one or more cor- 
porations or partnerships (i) when such corpora- 
tion or partnership owned directly or controlled 
through closely affiliated interests or by a nominee 
or nominees all or substantially all the stock of the 
other or others, or (2) when substantially all the 
stock of two or more corporations or the business 

212 



Sec. 1332 



GENERAL ADMINISTRATIVE PROVISIONS 

of two or more partnerships was owned by the 
same interests: Provided, That such corporations 
or partnerships were engaged in the same or a 
closely related business, or one corporation or part- 
nership bought from or sold to another corpora- 
ation or partnership products or services at prices 
above or below the current market, thus effecting 
an artificial distribution of profits, or one corpora- 
tion or partnership in any way so arranged its 
financial relationships with another corporation or 
partnership as to assign to it a disproportionate 
share of net income or invested capital. For the 
purposes of this section, public service corporations 
which (i) were operated independently, (2) were 
not physically connected or merged and (3) did not 
receive special permission to make a consolidated 
return, shall not be construed to have been affili- 
ated ; but a railroad or other public utility which 
was owned by an industrial corporation and was 
operated as a plant facility or as an integral part 
of a group organization of affiliated corporations 
which were required to file a consolidated return, 
shall be construed to have been affiliated. 

(c) The provisions of this section are declaratory 
of the provisions of Title II of the Revenue Act of 
1 9 17. 

Alternative Tax on Personal Service Corporations. 

Sec. 1 3^2. (a) That if either subdivision (e) Personal servic. 

• r> i- 1 T» A n 1 corporations 

of section 210 of the Revenue Act of 1Q18 or sub- =<">t;nsent 

7 provisions 

division (d) of section 218 of this Act is by final 
adjudication declared invalid, there shall, in addi- 
tion to all other taxes, be levied, collected, and paid 
on the net income (as defined in section 232) re- 
ceived during the calendar years 1918, 1919, 1920, 

213 



Sec. 1332 



REVENUE ACT OF 1921 



continued 



corp°o"aiion.-" ^^^ 1 92 1, by cvcry personal service corporation (as 
defined in section 200) included within the pro- 
visions of such subdivisions, a tax equal to the taxes 
imposed by Titles II and III of the Revenue Act 
of 1 91 8 and, in the case of income received during 
the calendar year 1921, by Titles II and III of this 
Act. 

(b) In such event every such personal service 
corporation shall, on or before the fifteenth day of 
the sixth month following the date of entry of de- 
cree upon such final adjudication, make a return 
of any income received during each of the calendar 
years 1918, 1919, 1920, and 1921 in the manner pre- 
scribed by the Revenue Act of 1918 (or in the 
manner prescribed by this Act, in the case of in- 
come received during the calendar year 1921). 
Such return shall be made and the net income shall 
be computed on the basis of the taxpayer's annual 
accounting period (fiscal year or calendar year, as 
the case may be) in the manner provided for other 
corporations under the Revenue Act of 191 8 and 
this Act. 

(c) If either subdivision (e) of section 218 of 
the Revenue Act of 1918 or subdivision (d) of 
section 218 of this Act is so declared invalid, claims 
for credit or refund of taxes paid under both such 
sections shall be allowed, if made within the time 
provided in subdivision (f) of this section. 

(d) In case the claims for credit or refund, filed 
within six months from such date of entry of decree, 
represent less than 30 per centum of the outstand- 
ing stock or shares in the corporation, the amount 
of taxes imposed by this section upon such corpora- 
tion shall be reduced to that proportion thereof 

214 



^* 



Sec. 1332 



GENERAL ADMINISTRATIVE PROVISIONS 



which the number of stock or shares owned by the cor^^lionT-" 
shareholders or members making such claims bears 
to the total number of stock or shares outstanding. 

(e) The tax imposed by this section shall be 
assessed, collected and paid upon the same basis, 
in the same manner, and subject to the same pro- 
visions of law, including penalties, as the taxes 
imposed by sections 230 and 301 of the Revenue 
Act of 1918 (or by sections 230 and 301 of this Act, 
in the case of income received during the calendar 
year 1921), but no interest or penalties shall be 
due or payable thereon for any period prior to the 
date upon which the return is by this section re- 
quired to be made and the first installment paid. 
The amount of tax paid by any shareholder or 
member of a personal service corporation pursuant 
to the provisions of subdivision (e) of section 218 
of the Revenue Act of 1918 or subdivision (d) of 
section 218 of this Act shall be credited against 
the tax due from such corporation under this 
section upon the joint written application of such 
corporation and such shareholder or member or 
his representatives, heirs, or assigns, if such appli- 
cation is filed with the Commissioner within six 
months from such date of entry of decree. 

(f ) Notwithstanding any other provision of law, 
no claim for a credit or refund of taxes paid under 
subdivision (e) of section 218 of the Revenue Act 
of 1918 or subdivision (d) of section 218 of this 
Act, may be filed after the expiration of six months 
from such date of entry of decree : Provided, how- 
ever, That a personal service corporation of which 
no shareholder or member has filed such claim 
within such period of six months, shall not be 
subject to the tax imposed by this section. 

215 



1918 



Sec. 1400 

REVENUE ACT OF 1921 

Title XIV. — General Provisions. 

Repeals. 

R:?lnu°eA''"or' ^^^- H^o. (a) That the following parts of the 

Revenue Act of 191 8 are repealed, to take eflfect 
(except as otherwise provided in this Act) on Jan- 
uary I, 1922, subject to the limitations provided in 
subdivision (b) : 

Title II (called "Income Tax") as of January 
I, 1921; 

Title III (called "War-profits and Excess- 
Profits Tax") as of January i, 1921 ; 

Title IV (called "Estate Tax") on the passage of 
this Act; 

Title V (called "Tax on Transportation and 
other Facilities, and on Insurance") ; 

Sections 628, 629, and 630 of Title VI (being 
the taxes on soft drinks, ice-cream, and similar 
articles) ; 

Title VII (called "Tax on Cigars, Tobacco and 
Manufactures Thereof") ; 

Title VIII (called "Tax on Admissions and 
Dues") ; 

Title IX (called "Excise Taxes") ; 

Title X (called "Special Taxes") ; 

Title XI (called "Stamp Taxes") ; 

Title XII (called "Taxes on Employment of 
Child Labor") as of January i, 1921; and 

Sections 1314, 1315, 1316, 1317, 1319, and 1320 
of Title XIII (being certain administrative provi- 
sions) on the passage of this Act. 

216 



Sec. 1401 



GENERAL PROVISIONS 



(b) The parts of the Revenue Act of 191 8 which if.:.V^'.i;r:id'" 
are repealed by this Act shall (unless otherwise """"o"' °' '"" 
specifically provided in this Act) remain in force 
for the assessment and collection of all taxes which 
have accrued under the Revenue Act of 191 8 at 
the time such parts cease to be in effect, and for the 
imposition and collection of all penalties or for- 
feitures which have accrued or may accrue in re- 
lation to any such taxes. In the case of any tax 
imposed by any part of the Revenue Act of 191 8 
repealed by this Act, if there is a tax imposed by 
this Act in lieu thereof, the provision imposing 
such tax shall remain in force until the correspond- 
ing tax under this Act takes effect under the pro- 
visions of this Act. The unexpended balance of 
any appropriation heretofore made and now avail- 
able for the administration of any such part of the 
Revenue Act of 1918 shall be available for the 
administration of this Act or the corresponding 
provision thereof. 

Increase in Note Authorization. 
Sec. 1401. That subdivision (a) of section 18 second Liberty 

r 1 cy 1 T 1 Bond Act 

of the Second Liberty Bond Act, as amended, is '""«"d«<» 
amended by striking out the words and figures 
"for the purposes of this Act, and to meet public 
expenditures authorized by law, not exceeding in 
the aggregate $7,000,000,000", and inserting in lieu 
thereof the words and figures "for the purposes of 
this Act, to provide for the purchase or redemption 
of any notes issued hereunder, and to meet public 
expenditures authorized by law, not exceeding in 
the aggregate $7,500,000,000 at any one time 
outstanding". 

217 



Sees. 1402-1404 



Limit on Treasury 

Savings certificates 
holding increased 



Validating .clause 



Effective date 



REVENUE ACT OF 1921 
Increase in Treasury Savings Certificate Limit. 

Sec. 1402. That section 6 of the Second Lib- 
erty Bond Act, as amended, is amended by strik- 
ing out in the next to the last sentence thereof the 
figures "$ 1,000" and inserting in lieu thereof the 
figures "$5,000". 

Saving Clause in Event of Unconstitutionality. 

Sec. 1403. That if any provision of this Act, 
or the application thereof to any person or circum- 
stances, is held invalid, the remainder of the Act, 
and the application of such provision to other per- 
sons or circumstances, shall not be affected thereby. 

Effective Date of Act. 

Sec. 1404. That except as otherwise provided, 
this Act shall take effect upon its passage. 

Approved, November 23, 1921, at 3.55 p. m. 



218 



Index 

Absence of taxpayer : pagb 
Extension of time, individual, corporation .... 59, 79, 199 
When agent shall make return for individual, corpo- 
ration 56, 77 

Accident and health insurance received, is exempt w^hen 29 

Accounting, change of period, for individuals 27, 58 

Method of 27 

Accumulated profits of corporations to evade tax 50 

Act to take effect 218 

Additional income tax or surtax for 1921 17 

For year 1922 and thereafter 22 

Adjustment for over- or understatement in return 89, 97, 191 

Administrative Provisions, General, Title XIII 189 

Administrative Provisions, Income Tax, Title II, Part IV 88 

Additional penalty for fraudulent statement 90 

Adjustment of over- or understatement 89, 97 

Brokers' returns of information 99 

Collection of foreign items 102 

Commissioner to examine returns 89 

. May prevent departure to evade tax 94 

May waive requirements for citizen 95 

Dividend payments, information of 98 

Extension of time for payment 88 

Of time for payment of deficiency 93 

Information at source of payments 99 

Instructions on return form are notice and demand for 

first payment 93 

Notice and demand 90, 91, 93 

Payment of tax in installments 88 

in single payment 88 

Penalty for delay in payment after notice and demand.. 92 

Other penalties 88, 89, 98 

Porto Rico and Philippine Islands, tax for 103 

Receipts for taxes on request 96 

Refunds of overpayments 97 

United States possessions, tax on citizens of 102 

Income from sources within 103 

Administrative Review 200 

219 



INDEX 



PAGE 



Admissible assets defined 109 

Admissions and Dues, Tax on, Title VH, after January 

I, 1922 146- 150 

Admission defined 148 

Boxes and seats at the opera or theater, lease of 147 

Cabarets 147 

Collection of taxes 150 

Dues, tax on, after January i, 1922 149 

Excess price of tickets, tax on 147 

Exemptions 148, 149 

Fraternal orders, exempt when 149 

Opera tickets 146 

Price of ticket and name of vendor to be thereon 149 

Returns, by person collecting tax 150 

Roof gardens 147 

Theater tickets 146 

Affiliated corporations 78 

Agent, returns by, for individuals 56 

For foreign corporation 77 

Agreement of sale of produce, stamp tax on 180 

Of sale of shares, stamp tax on 178 

Agricultural organizations exempt from income tax .... 61, 62 

Alcohol, provisions pertaining to 135 

Alien leaving country must obtain clearance certificate 95 

Alien residents, credits for taxes 54 

Aliens, nonresident individual : 

Claims for exemption from withholding 45 

Credits for tax withheld 53 

Deductions 42, 43 

Excluded from net income of 42 

Exemption 40 

Net income 4° 

Property subject to distraint for tax 45 

Return must be filed to obtain credit 44 

Returns 56, 59 

Tax paid at source for 51 

Amendments of Revised Statutes 194 

Amortization of war plant and equipment : 

By individuals 34 

By corporations 08 

Annuity, amount of premium returned, exempt 28 

Art porcelains and bronzes, etc., tax on sale of I53 

Articles sold or leased, tax on miscellaneous 150- I55 

Beverages '34- I37 

Cigars and cigarettes 138- 140 

Cigarette paper 142 

Distilled spirits, tax on I34 

Continued on next page 

220 



INDEX 

Articles sold or leased, tax on miscellaneous — Continued pace 

Jewelry 154 

Miscellaneous articles 150 

Narcotics 166- 173 

Tobacco and snuff 140, 163 

Special tobacco manufacturers' tax 163 

Works of art 153 

Assessment and Collection of Income Tax : 
For individuals: 

Date of payment 88, 59 

Deduction of tax at source on tax-free covenant 

bonds 52 

Deductions of normal tax on aliens' income 51 

License required to collect foreign items 102 

Payment of tax, installments or single payment 88 

By U. S. certificates of indebtedness or check 206 

Penalty for delay in payment 88, 92, 98 

Returns required 56- 58 

Returns, when and where to be filed 59 

Tax due 88, 59 

For corporations : 

Date of payment 79, 59, 88 

Deduction of tax on income of foreign corporations 73 

License required to collect foreign items 102 

Payment of tax by U. S. certificates of indebtedness 

or uncertified check 206 

Penalty for delay in payment 88, 92, 98 

Returns required 77 

Time and place for filing 79, 59 

Tax due (same as for individuals, see page 59) 88 

War-profits and excess-profits, tax (provisions same 

as for income tax) 116 

For employment of child labor 188 

Limitation on time for assessment 205 

Assignees in bankruptcy, returns of 77 

Attorney, power of, stamp tax on 183 

Automatic slot machines, sale or lease of, tax on 151 

Automobile, tax on sale of, and accessories 150, 151 

Tax on operation for hire 162 

Bags, hand and shopping, tax on excess price of 154 

Beneficiary of estate or trust, income of 47, 48 

Bequests, exempt from income tax 28 

Shrinkage in value not deductible 38 

Betterments, no deduction allowed for improvements : 

Corporations (same as individuals, page 38) 72 

Individuals 38 

221 



INDEX 



PAGE 



Beverages, tax on, Title VI 134 

Alcohol, provisions pertaining to 135 

Bottled water, tax on 136 

Cereal beverages, tax on 135 

Carbonated gas and drinks, tax on 137 

Distilled spirits, tax on 134, 135 

Fruit juices, tax on 135 

Registry, certificate of 138 

Returns 137 

Sales at soda fountains and ice-cream parlors 136, 137 

Sirups, tax on 136 

Soft drinks, tax on 135- 137 

Still drinks, tax on 136 

Bill for cash sales, exempt from stamp tax 181 

Billiard room ovi^ners, tax on 161 

Boards of trade exempt from income tax 62 

Boats, sale of, excise tax on 152 

User of boat, special tax on 164 

Bond interest, exemptions from income tax 29, 20g 

Bonds: 

Containing tax-free covenant, interest deductible at 

source 52, 73 

Interest on government bonds, exempt to what ex- 
tent 29, 209 

Returns of interest payments regardless of amounts and 

dividends of foreign corporations lOO 

Bonds of indebtedness, stamp tax on 178 

Bonds of United States, exempt only to extent provided in 

Act authorizing same 29, 209 

Bookkeeping : 

Corporations 77 

Individuals 27, 58 

Inventories 1 1 

Books, examination of, by government officers 193. 198 

Boots for livery, tax on excess price 152 

Bottled vi^ater, etc., tax on 136 

Bow^ling-alley ovi^ners, tax on 161 

Brewers, tax on 162 

Brokers : 

Information to be disclosed by, regarding customers .... 99 

Tax on 158 

Building and Loan Associations exempt 62 

Business expense, allowable deduction to individuals 31 

Corporations "5 

Foreign corporations 7' 

Business leagues exempt from tax 62 

222 



INDEX 



PAGE 



Cabarets, tax on admission to 147 

Cable messages, tax on 133, 134 

Cameras, sale of, tax on 151 

Candy, tax on 151 

"Capital gain" defined 14 

Election to be taxed on 15 

Corporations excluded 15 

Estates and trusts, tax for 16 

Partnerships, tax for 16 

Capital invested, determined for war-excess-profits tax 1 10 

Does not include Ill 

How determined in difficult cases 112 

Of foreign corporations 112 

Stock, without par value, as invested capital 109 

Capital stock tax on capital stock of corporations 157 

Capital stock, stamp tax on issue 178 

Stamp tax on sale or transfer of 178 

Carbonated drinks, tax on 137 

Cards, playing, stamp tax on 184 

Carpets, tax on excess price of I54 

Cartridges, tax on sale of 151 

Cash sale, bill for, exempt from stamp tax when 181 

Cemetery companies exempt from tax 62 

Certificates of indebtedness in payment of taxes 206 

Chambers of commerce exempt from income tax 62 

Charitable organizations : 

Contributions to, deductible from net income 36 

Exempt from tax 62 

Checks, uncertified, in payment of tax 206 

Stamp tax on 182 

Child labor, employment of, tax on. Title XII 185 

Age certificates 187 

Assessment of tax 188 

Computation of net profits 185 

Employment certificates 187 

Fair market price governs tax on sale 186 

Inspection of working places 188 

Penalty for obstruction of 189 

Net profits 185 

Payment of tax 188 

Tax rate 185 

Taxable year 189 

Children, additional exemption of $400 for each dependent 40 

Cigars and cigarettes, tax on 138, 139 

Importers of, tax on 138, 139 

Manufacturers of, tax on 163, 164 

223 



INDEX 

PAGE 

Cigarette papers and tubes, tax on 142 

Circus owners, tax on 160 

Citizens of U. S. possessions, tax on 102 

Civic leagues exempt from income tax 63 

Claim for exemption to be filed with withholding agent on 

or before February i by citizen or resident 52, 53 

Claim for refund within certain time 202 

Clocks, tax on sale of 155 

Club dues, tax on 149 

Clubs for recreation, when exempt 63 

Coca leaves, tax on manufactures of and sale of 166- 173 

Collateral security, no stamp tax on, when 179 

Collection of foreign items, license required 102 

Collection of income tax — see Index at Assessment. 

Collection of taxes where not specifically provided for 196 

Collector of Internal Revenue : 

Annual returns made by, in what cases 197, 198 

May grant extension 199 

May make returns, when 197 

To examine books of taxpayer 198 

To extend time for filing return 199 

To proceed through district for inspection ig6 

When he may proceed outside his district 198 

Commissioner of Internal Revenue : 

Assesses income taxes 199 

May grant extension for filing return 59 

May make return, when 199 

To examine books, papers, when no return 193 

To examine returns 89 

To make rules and regulations 191 

Community chests, exempt from income tax 62 

Compulsory conversion of property into cash 36, 37 

Consolidated returns for affiliated corporations 78 

For year 1917 212 

Conversion of property under compulsion 36, 37 

Concert halls, tax on owners of 159 

Consumption taxes on articles sold 150- I55 

Contributions to charitable, etc., organizations 36 

Contracts to sell made prior to August 15, 1921 155 

Conversion of property under compulsion 36, 37 

Conveyances, stamp tax on 182 

Corporation defined i 

Corporations (Income Tax), Title II, Part III 61 

Accounting ■ 77 

Change of method of accounting 77, 58 

Adjustment for over- or underpayment of taxes .... 89, 97 
Continued on next page 
224 



INDEX 

Corporation (income tax) — Continued tage 

Administrative provisions 88- 104 

Affiliated corporations 78 

Amortization of war plant and equipment 68 

Assessment and collection of tax 77-79, 88 

Bad debts and reasonable reserve 67 

Business expense deductible 65 

Consolidated return for affiliated corporations 78 

Corporation owning voting stock of foreign corpora- 
tion 78, 79 

Credits allowed 72, 73 

For taxes 74- 76 

Deductions allowed 65 

Items not deductible 72 

Definition of i 

Depletion of mines and other natural resources 68 

Depreciation 67 

Dividends, statement of payments of 77 

Received from another corporation, deductible 67 

Exempt corporations 61- 64 

Exemption for domestic corporation 72 

Extension of time for payment 88 

Fiscal year 3 

Foreign corporations: 

Deductions allowed 71 

Gross income 65 

Returns 77- 79 

Tax withheld at source 73 

Voting stock of, owned by domestic corporation 78 

Government contracts defined 2 

Under excess-profits tax 105 

Gross income defined 64 

Holding title only, when exempt 63 

Income from U. S. possessions 103 

Information of dividend payments 98 

By brokers 99 

Of interest paid on bonds 99i lOO 

Of payments of $1,000 or over 99, lOO 

Returns of, for tax withheld, due 73> 53 

Insurance companies' reserves and deductions 69- 71 

Tax on life insurance companies 80- 84 

Tax on other insurance companies 84- 87 

Interest deductible 65 

Items not deductible 72 

Losses allowable as deduction 66 

Net income 64 

225 



INDEX 

PACE 

Corporation (Income Tax), Title II, Part III — Continued 

Notice and demand for payment 90- 93 

Return form sufficient notice and demand for first 

payment 93 

Payment of tax withheld at source 73> 53 

On tax free covenant bonds not additional income.... 66 

Payment of corporation income tax 88- 96 

Penalties 88, 92, 98, 190 

Personal service corporation, defined 4 

Alternative tax 213 

Distributees of taxed 46 

Exempt from corporation tax, when 64 

Philippines, Act of 1916 applies 103 

Porto Rico, Act of 1916 applies 103 

Possessions of the United States, citizens of, how 

taxed 102 

Profits of corporations taxable to stockholders, when .... 50 

Receipts for taxes upon request 96 

Refunds of excess tax payments 97 

Reserves for insurance companies 69- 71 

Returns of income tax 77, 79, 80 

Of foreign corporations 79, 80 

Extension of time for filing 88 

Inspection of by stockholders and state officials loi 

Tax on life insurance companies 80- 84 

Tax on other insurance companies 84- 87 

Taxable year 3 

Tax due 88 

Taxes deductible 65 

Tax rate, year 1921 61 

Year 1922 and thereafter 61 

Understatement in return and penalties 89 

Courts, jurisdiction of United States 193 

Covenants, tax-free, in bonds 52, 73' 

Credits for normal tax 39 

Alien, nonresident individuals must file returns to 

obtain 44 

For dependents or children under eighteen, $200 40 

For dividends 39 

For married person or head of family 39, 40 

For single person 39, 40 

For partners 45 

For U. S. bond interest 39 

Credit for taxes: 

Corporations 74 

For fiscal years 13 

Individuals 54- 56 

226 



INDEX 

PAGE 

Customers of brokers, information at source 99 

Customhouse brokers, tax on 159 

Customhouse entries, stamp tax on 182, 183 

Daggers and hunting knives, tax on sale of 151 

Dealer, defined (tax on narcotics) 167 

Debts, worthless and charged off, and reserve deductible : 

By corporations 67 

By individuals 34 

Decedent estates, delay in payment of tax 127 

Deduction of tax at source : 

Applies to interest on tax-free covenant bonds 52 

Exemption to be claimed on or before February i 53 

On income of nonresident aliens 51 

On income of foreign corporations 73 

Deductions allowed corporations in computing net in- 
come 65- 71 

For domestic corporations : 

Amortization of war plant, etc 68 

Business expense 65 

Compulsory conversion, portion of 71 

Debts charged off and reserves 67 

Depletion of natural resources 68 

Depreciation, reasonable 67 

Dividends 67 

Insurance companies 69- 71 

Interest paid on indebtedness 65 

Losses sustained 66 

"Net losses" 11 

Reserves of insurance companies and conditions 69- 71 

Taxes 65 

Tax paid for stockholders 32, 66 

Deductions allowed individuals (see also Credits) 31 

For citizens or residents: 

Amortization of war plant and equipment 34 

Business expense 31 

"Capital loss," if elected 14- 16 

Contributions 36 

Compulsory conversion, loss by 36 

Debts charged off and reserve 34 

Depletion 35 

Depreciation 34 

Interest paid on indebtedness 32 

Items not deductible 38 

Losses 32, 33 

"Net losses" " 

Taxes 32 

As to nonresident aliens 37 

227 



INDEX 

FACE 

Deeds, stamp tax on 182 

Definitions: general definitions i 

Admission defined 148 

Capital gain 14 

Capital invested for war and excess-profits tax 1 10 

Capital loss 15 

"Collector" 2 

Commissioner 2 

Corporation i 

Dealer (tax on narcotics) 167 

Dividend 4 

Domestic I 

Fiduciary 3 

First taxable year 3 

Fiscal year 3 

Foreign I 

Government contract 2 

Gross income, corporations 64 

Gross income, individuals 27 

Military and naval forces of U. S 2 

Net income, corporations 64 

Net income, individuals 26, 40 

Net losses 11 

Paid 3 

Person i, 168 

Personal Service Corporation 4 

"Secretary" 2 

Taxable year 3 

Taxpayer 2 

United States 2 

Withholding agent 3 

Delay in payment of tax, penalty for: 

Corporations 88, 92, 98, 190 

Decedents' estates 127 

Individuals 88, 92, 98, 190 

Dependents, credit for 40 

Depletion of mines and wells : 

Corporations 68 

Individuals 35 

Deposits by nonresident decedent in U. S. banks 125 

Depreciation, deduction for: 

Corporations 67 

Individuals 34 

Descent, property acquired by, exempt from income tax 28 

Devises exempt from income tax 28 

Distilled spirits 134, 135 

Distillers, tax on 162 

228 



INDEX 

PAGE 

Distributions deemed to be from earnings or profits 4, 5 

Made in first 60 days of year 6 

Dividend, defined 4 

Credited for normal tax of individuals 39 

Date and year in which taxable 6 

Deductible by corporations for normal tax 67 

Earnings since February 28, 1913 4, 5 

Included in gross income of individuals 27, 28 

Of corporations 64, 27, 28 

Information of, by corporations 98 

Stock dividends 5 

Domestic, when applied to corporations, defined I 

Drafts, stamp tax on 182 

Dues, tax on 149 

Educational organizations, when exempt 62 

Essences, tax on sale of 136 

Estate Tax, Title IV 116 

Administrator same as "executor" 116 

Beneficiary of insurance to bear share of tax 129 

Collection of tax when not paid 129 

Collector defined ii7 

May make return when none is made 127 

May enforce payment 129 

Commissioner may grant extension 127 

Deductions, resident decedent estate 121- 123 

Nonresident decedent estate 123- 125 

Deposits by nonresident decedents in U. S. banks 125 

Executor defined 116 

May obtain relief from personal liability 128 

To give collector notice 126 

To pay collector the tax 127 

Exempt estates (of those in Great War) 118 

Exemption of $50,000, resident decedent 123 

Extension of time for return 127 

Gross estate determined, resident ii9- 121 

Insurance, when in gross estate 121 

Of nonresident when exempt 125 

Joint tenants interest 120 

Missionaries, status of 125 

Net estate determined 121 

Nonresident net estate 123 

Payment of tax '^7 

Penalties ....127,131 

Property of nonresident which is deemed withm the 

U. S ^^5 

Receipts for taxes 1^0 

Continued on next page 

229 



INDEX 

Estate Tax, Title IV — Continued rA°= 

Refunds for taxes redetermined 126 

"Resident" includes citizen of U. S. under Court for 

China 131 

Return by executor 126 

Extension 127 

When gross estate exceeds $50,000 126 

Tax rates on net estate 117 

Tax a lien on estate ten years 130 

Due one year after death 127, 128 

Trusts or transfers in contemplation of death 130 

Estates and Trusts — Income Tax 47- SO 

Beneficiary to pay tax, when 48 

Capital gain for 16 

Credits allowed 48 

Deductions allowed fiduciary 49 

Fiduciary to make return 47) 57 

Fiduciary, when to pay tax 48 

Trusts for employees 49 

Evasion of taxation by incorporation 50 

Examination of books and witness 193, 197 

Executor, defined 1 16 

Returns of 126 

Excess-profits tax (see index at War-profits Tax) 104 

Excise Taxes, Title IX ' 150 

On articles sold or leased 150- 152 

On excess prices paid for articles 154 

On jewelry, clocks, opera glasses, watches, etc., sold 1 54i 155 

On paintings and works of art 153 

On prior contracts, adjusted 155 

Returns 153, 155 

Exempt income 28 

Annuities, when exempt 28 

Bequests 28 

Devises 28 

Gifts 28 

Income of foreign governments 29 

Income of nonresident aliens from foreign ships 30 

Interest on farm loan securities 29 

Interest on government obligations 29, 209 

Interest from building and loan associations 31 

Mutual shipowners' indemnity associations 31 

Proceeds from insurance policies 28, 29 

Public utility income accruing to State or United 

States 29, 30 

Rental value of minister's home 31 

War risk insurance 31 

230 



INDEX 



PAGE 
I 



Exempt organizations from income tax, and conditions ui 

Agricultural 62 

Building loan associations, domestic 62 

Business leagues 62 

Cemetery companies 52 

Charitable associations 62 

Civic leagues 6^ 

Clubs for recreation only 63 

Community chests 62 

Corporations holding title only, when exempt 63 

Educational organizations 62 

Farmers' associations 63 

Federal land banks 64 

Fraternal beneficial societies 62 

Fruit growers' associations 63 

Labor organizations 62 

Mutual insurance companies, when exempt 63 

Mutual savings banks 62 

National farm loan associations 64 

Personal service corporations (not effective after Dec. 

.31, 1921) 64 

Religious, etc., organizations 62 

Scientific organizations 62 

Exemptions, specific: 

Citizens 39 

Corporations — domestic, for income tax 72 

Corporations — domestic for excess-profits tax 108 

Credits for dependents, citizens 40 

Nonresident aliens, $1,000 40 

Exhibitions, owners of public, tax on 161 

Exporters, refund of erroneous tax collections 192 

Extension of time for filing return 59. 79. i99 

When interest runs on amount of tax 88 

Extension of general laws to this Act 189 

Extracts, tax on 136 

Failure to make return or supply information, penalty .... 

88, 92, 98, 199 

False or fraudulent return, penalty 9o 

Fans, tax on excess price of •;— ^54 

Farmers associations, when exempt 02, b3 

Farm Loan Act securities exempt from income tax 29 

Federal Land Banks, exempt from income tax 64 

Fiduciary defined • •.■■■;■.■■■.■;■"■■,■ ".'^' -a 

Subject to provisions for mdividuals 47. 5» 

To make information returns 99 

231 



INDEX 

Fiduciary defined — Continued tage, 

To make returns for trusts and estates 47, 57, 58 

When to pay the tax 48 

Fire-arms, tax on sale of 151 

Fiscal year changed 27 

Fiscal year defined 3 

Adjustment of tax under 1918 Act 13 

Apportionment of partner's income 14 

Change of 27 

Returns for 1921 and 1922 13 

Foreign defined i 

Foreign governments, income from U. S. exempt 29 

Foreign items, collections of, license required 102 

Fraction of a cent on tax 192 

Fraternal organizations, when exempt from income tax 62 

Frauds on purchasers 207 

Gain or loss on sale determined 6- 11 

Earnings prior to March i, 1913, on stock sold 5 

Gains included in gross income 27 

General administrative provisions. Title XIII 189 

General definitions I 

General Provisions, Title XIV 216 

Repeals of parts of Act of 1918 216 

This Act to take effect 218 

Validating clause 218 

Gifts received exempt from income tax 28 

Shrinkage in value not deductible 38 

Tax on disposition of 6, 7 

Gifts to charitable, educational and scientific corporations, 

deduction allowed for 36 

Gold mining income, when exempt from excess-profits' tax 108 

Government bonds exempt from stamp tax 173 

Interest from, exempt 29, 209 

Government contract defined 2 

Application to excess-profits 105 

Government officials, which are subject to income tax.... 27, 28 

Grape-juice, tax on 135 

Gross income defined (individuals) 27 

Corporations 64 

Nonresident alien's income 31, 40 

Handbags, tax on excess price of 154 

Head of a family, specific exemption 39, 40 

Husband and wife, specific exemption 39, 40 

Hunting knives, tax on sale of 151 

232 



INDEX 



PAGE 



Improvements, when no deduction allowed for: 

Corporations 72, 38 

Individuals 38 

Inadmissible assets defined 109 

Income from sources within possessions of the U. S 103 

Income from within U. S. to foreign governments exempt 29 
Income Tax as to Corporations. See Index at "Corpora- 
tions." 

Income Tax — Individuals, Title II, Part II 16 

Accounting method of 27 

Additional or surtax for 1921 17 

For 1922 and thereafter 22 

Administrative provisions 88- 104 

Agent, when to make return 56 

Amortization of war plant equipment 34 

Capital gain and election of tax applicable 14, 15 

Citizen, when treated as a nonresident alien 40, 103 

Citizens of U. S. possessions, how taxed 102, 103 

Exemption of 40 

Compulsory conversion of property 36 

Contributions deductible 36 

Credits allowed 39 

Credits for taxes 54, 56 

Credit for dependents 40 

Deductions allowed 31- 38 

Items not deductible 38 

Definitions of words as used in this title 3 

Depletion of natural resources 35 

Depreciation 34 

Estates, income of 47 

Exempt income 28- 31 

Exemption and credit for dependents 39, 40 

Date determined 40 

Extension of time 59, 199 

Fiduciary returns 47, 57, 58 

Fiscal year changed 27 

Gross income 27 

Gross income does not include 28- 31 

Information at source 99 

Insurance, when exempt from 28, 29 

Losses deductible 32, 33 

Loss determined 6- 11 

Mines, profits on sale of 26 

Natural resources, profits on sale of, tax limited.... 26, 116 

Net income, individuals 26 

"Net loss" II 

Of nonresident aliens 40 

Continued on next page 

233 



INDEX 

Income Tax — Individuals — Continued tage 
Nonresident aliens : 

Credits (must file returns to obtain) 40, 44 

Credits for tax withheld 53 

Deductions allowed 37 

Exemption 40 

Income from earnings of foreign ship 30 

Net income from gross income from within U. S. 

31. 40- 45 

Normal tax for individuals 16 

Partners taxed, not partnership 45, 46 

Payment of income tax 88- 96 

Payment of tax withheld at source 53 

Not additional income 66 

Penalties 88, 98 

Personal service corporation: 

Income from taxable to individual, when 46 

Personal exemption 39, 40 

Date determining 40 

Nonresident alien 40 

Receipts for tax on request 96 

Refunds of taxes erroneously paid 97 

Resident aliens, credits for taxes 54 

Returns of income tax 56 

Extension of time 59, 199 

By brokers 99 

By fiduciary 57, 59 

Of information 99 

Of tax withheld 53, 73 

Salaries of certain government officials taxable 27, 28 

Surtaxes for year 192 1 17- 22 

For year 1922 and thereafter 22- 26 

Tax due 88- 96 

Taxes deductible 32 

Credits for 54 

Trusts, income of, taxable 48 

Credit for taxes 48 

Exemption or credit for 48 

Returns for 57 

Understatement in returns 60 

Incorporation of individual or partnership business 60 

Incorporation to evade taxation 50 

Information at source of payments of $i,CXX)or over 99 

By brokers 99 

By corporations 99 

Of dividends paid 77, 98 

Penalties 98 

234 



INDEX 

PAGE 

Inheritance Tax, See Estate Tax, Title IV ii6 

Installment payments of tax 88 

Insurance company reserve and deductions 69- 71 

Mutual companies when exempt 63 

Tax on life-insurance companies 80- 84 

On other insurance companies 84- 87 

Additional deductions 69- 71 

Insurance policies, stamp tax on 184 

Reinsurance exempt 184 

Interest : 

Exempt from income tax 29 

From building and loan associations until Jan. i, 1927 31 

Information to be furnished of payments of 99 

Liberty bond exemptions consolidated 209 

On tax-free covenant bonds to be vi^ithheld 52, 73 

On government bonds exempt 29 

On government bonds issued after September i, 1917 29 

On refunds and judgments allowed 205 

Paid on indebtedness, deductible: 

By individuals 32 

By corporations 65 

Withholding at source from foreign corporations 73 

Inventories, when Commissioner may prescribe 1 1 

Invested capital (see Capital Invested) no 

Jewelry, tax on sale of 154 

Joint-stock company, included in term corporation I 

Judges of U. S. Court, salary taxed 27, 28 

Judicial code amended 194 

Jurisdiction of U. S. Court 193 

Keeping accounts, no prescribed form : 

Corporations 77 

Individuals 27, 58 

Labor organizations exempt from income tax 62 

Lamps and lampshades, tax on excess prices of i54 

Liberty bonds interest as income 29 

Exemptions consolidated 209 

Lien for estate tax 130 

Limitation of income tax on sale of mines 26, 116 

Of excess-profits' tax 106 

Limitation of time for refunds 97 

Of suit to collect tax 203 

License required for collection of foreign items 102 

Life insurance policy, proceeds of, when exempt 28, 29 

235 



INDEX 

PAGE 

Life insurance companies, tax on 8o- 84 

Liquor dealers, tax on 162 

Losses deductible by individual 32, 33 

By corporation 66, 67 

Losses, when apportionable to partner 45 

Loss or gain on sale determined 6- 11 

Limitation of loss on sale of securities 33, 66 

Lost stamps, when replaced for liquors and tobacco 212 

Luxury taxes on articles sold 154- 157 

Married man or woman, personal exemption 39 

Membership dues, tax on 149 

Mileage books and tickets, tax on refunded 133 

Military and naval forces of U. S. includes 2 

Mineral waters, tax on 136 

Mines, depletion of, deduction for 35, 68 

Mines, tax limited on profits of sale of 26, 1 16 

Minister's house, rental value of, exempt 31 

Motor-boats, tax on sale of 152 

Tax on use of 164 

Motorcycles, tax on sale of 150 

Municipal bonds, exempt from stamp tax 173 

Interest of, exempt from tax 29 

Mutual insurance companies, additional deductions 70 

Tax on 80 84 

When exempt from income tax 63 

Narcotics, tax on 166- 173 

National Farm Loan Associations exempt 64 

Net income, income tax, individuals 26 

Income tax, corporations, domestic and foreign 64 

Nonresident aliens 40 

War-profits and excess-profits tax corporations 108 

Net losses for income tax defined 11 

Proof of and when allowed 12 

Nonresident aliens, tax withheld at source 51 

Claims for exemption from withholding 45 

Credits 44 

Credits for tax withheld 53 

Deposits in U. S. banks 125 

Property subject to distraint for tax 45 

Returns 56, 59 

Normal tax, individuals 16 

Notes, promissory, tax on 182 

Occupational Taxes (see index at Special Taxes) 158 

Opera boxes or seats, subscription to, tax on 147 

Opera tickets, tax on 146 

236 



INDEX 

PAGE 

Opium and derivatives, dealers in, tax on ibb 

Quantity sold, tax on i68 

Paid means paid or accrued 3 

Paintings, tax on sale of 153 

Partners, credits to 45 

Partnerships, partners, not partnership, taxed 45, 46 

Adjustment of partner's income for fiscal year .... 14, 45 

Capital gain for 16 

Incorporation of 60 

Net income, how computed 46 

Returns 57, 59 

To make returns 57 

Withholding of tax on certain partnerships 51, 52 

Passage tickets, stamp tax on 183 

Paw^nbrokers, tax on 159 

Payment of income taxes in installments 88 

See also Index at Assessment and Collection of. 

Payment of tax at source 51 

For foreign corporations 73 

On tax-free covenant bonds 52, 73 

Not additional income 66 

Returns for amounts withheld 53, 73 

Payment of tax by check or U. S. Securities 206 

Payments to be reported : 

Of $1,000 or more 99 

Of interest on bonds 100 

Penalties for income tax returns and payment 98 

Decedent's estate 127 

For disclosing contents of return 195 

For failure to affix stamps I74 

For failure to make returns 

88, 90, 92, 98, 189, 190, 199 

For fraud in connection with stamps 175 

For failure to supply information returns 98 

For making false returns 98, i99 

For delay in paying tax, interest on tax : 

Corporations 88 

Individuals "8 

Pension for service in time of war exempt 30 

Person, word as used includes i 

Personal expenses not a deduction : 38, 72 

Personal service corporation defined 4 

Alternative tax on 213 

Distributees of, taxed 46 

Exempt when ^4 

Tax does not apply after Dec. 31, 1921 46 

237 



INDEX 

PAGE 

Personal exemptions: 

Citizens 39. 40 

Nonresident aliens 40 

Permanent improvements, no deduction for 38, 72 

Philippine Islands, tax for 103 

Pipes, tax on sale of certain 151 

Playing cards, tax on 184 

Portable lighting fixtures, tax on excess price of 154 

Porto Rico, tax for 103 

Power of attorney, stamp tax on 183 

Premiums paid on life insurance not deductible 38, 72 

Produce, sale of, stamp tax on 180 

Profits of corporation, when taxed to stockholders 50 

Promissory notes, stamp tax on 182 

Prosecutions for violation, limit of time for 204 

Proxy, stamp tax on 183 

Public records, returns to be 100 

Public utility contracts, income from, when exempt 30 

Purses, tax on excess price of 154 

Radio messages, tax on 133, 134 

Railroad tickets, refund of tax on mileage 133 

Rates, normal tax, individuals 16 

Surtax, 1921 17 

For 1922 and thereafter 22 

Receipts for income taxes paid, on request 96 

Receivers' returns 77 

Refund of excess payments of tax 201 

Regulations retroactive 201 

Religious organizations exempt 62 

Reorganizations 8, 10, 60, 114 

Repeal of parts of Revenue Act of 1918 216, 217 

Restoration of property, when not deductible 38, 72 

Return form for income tax constitutes notice and demand 93 
Returns : 

Assignee in bankruptcy 77 

By agents 56, 59 

Brokers, of information when required 99 

Corporations 77) 79 

Inspection of, by order of President icx) 

By State officials loi 

By stockholders loi 

Extension of time for 59> I99 

Fiduciary 57, 59 

For period of less than 12 months 58, 59 

Forms constitute notice and demand, when - 93 

Individuals 56, 59 

Continued on next page 

238 



INDEX 

Returns — Continued •'*°= 

Information 99 

Nonresident aliens 59 

Of tax withheld '. 53, 73 

Partnership 57, 59 

Penalties (See Index at Penalties) 88, 98 

Receivers and trustees in bankruptcy 77 

Returns not otherwise provided for in the Act 196 

Special 192 

Understatement in returns 60 

When accounting period is changed 58 

When subject to inspection 100- loi 

Returns to be public records 100 

To be listed lOi 

Riding academy owners, tax on 161 

Roof gardens, tax on admission to I47 

Rugs, tax on excess price of I54 

Salaries of some government officials taxed 27, 28 

Sale of articles, tax on excess price of i54 

Of beverages, tax on sale I34- I37 

Of cigars and cigarettes, tax on sale 138- 140 

Of cigarette papers, tax on sale 142 

Of clocks, watches, etc., tax on sale i55 

Of distilled spirits, tax on sale I34 

Of jewelry, etc., tax on sale I54 

Of miscellaneous articles, tax on sale 150- 152 

Of narcotics, tax on sale 166- 173 

Of tobacco and snufE, tax on sale 140, 163 

Special tobacco manufacturer's tax 163 

Of works of art, tax on sale i53 

Sale of mines, oil and gas wells 26, 116 

Sale of property, gain or loss determined 6- 11 

"Capital gain" 14 

Secretary defined 2 

Schedule A — Stamp taxes 178 

Scientific organizations, when exempt 62 

Shipbrokers, tax on i59 

Shooting gallery owners, tax on 161 

Snuff, tax on manufacturer or importer of 140- 146 

Soft drinks, tax on 135" 137 

Special Taxes (Capital Stock and Occupational Taxes), 

Title X 157 

Automobile owners, operating for hire or renting 162 

Billiard room owners 161 

Boat owners and users 164 

Bowling alley, owners of 161 

Continued on next page 

239 



INDEX 

Special Taxes (Capital Stock and Occupational Taxes), 

Title X — Continued page 

Brewers 162 

Brokers 158 

Capital stock tax (corporations) i57 

Cigars and cigarettes, manufacturers of 164 

Circus owners 160 

Coca leaves and compounds, importers of 166 

Concert hall owners 159 

Customhouse brokers 159 

Dealer defined 167 

Distillers 162 

Exhibitions, owners of public 161- 

Importer and manufacturer defined 167 

Liquor dealers 162 

Museums, owners of 159 

Narcotics 166 

Exceptions 171 

Opium, coca leaves and compounds 166 

Pawnbrokers 159 

Person defined 168 

Registration, when required for drug dealers 166 

Riding academies, owners of 161 

Shipbrokers 159 

Shooting galleries, owners of 161 

Taxes imposed are in addition to other taxes (nar- 
cotics) 169 

Tobacco, manufacturers and dealers in 163 

Theaters, owners of 159 

Specific exemptions : 

Citizens 39, 40 

Corporations 72, 108 

Nonresident aliens 40 

Stamp taxes. Title XI 173- 185 

Bonds, of indebtedness 178 

Capital stock, issue of 178 

Capital stock, sale of 178 

Checks and drafts 182 

Conveyances 182 

Customhouse entries 182 

Customhouse entries for withdrawal 183 

Drafts 182 

Exemptions and exceptions 173, 179, 182, 184 

Insurance policies 184 

Passage tickets 183 

Penalties 174, 175 

Playing cards 184 

Continued on next page 
240 



INDEX 

Stamp Taxes, Title XI — Continued tage 

Promissory notes 182 

Powers of attorney 183 

Produce, sale of, on exchange 180 

Proxies 183 

Schedule A 178 

States and Territories, income of 29 

Statistics to be published by Commissioner loi 

Stockholders, when taxed on corporation profits 50 

Tax paid for 32, 66 

Stock dividends 5 

Suit to collect tax, limitation of time for 203 

To recover tax paid, limitation of time 203 

Suit cases, tax on sale of 154 

Surtax rates for 1921 17 

For year 1922 and thereafter 22 

Incorporation to evade 50 

Tax paid at source 51, 73 

Date of return and payment 53, 73 

On tax free covenant bonds not additional income 66 

Tax Simplification Board 207 

Taxable year defined 3 

Tax-free covenant bonds 52, 73 

Taxes deductible: 

By individuals 32 

By corporations 65 

Tax paid for stockholders 32, 66 

Taxpayer defined 2 

Telephone and Telegraph messages, tax on. Title v.... 132- 134 

Leased wires, tax on 133 

Theater owners, tax on 159 

Theater tickets, tax on 146 

Theater boxes, tax on subscription to 147 

Tires, tax on sale of automobile 150, 151 

Tobacco, tax on 138, 140- 146 

Farmers and growers of tobacco not dealers 146 

Leaf, dealers in, additional tax for violation 145 

Monthly report of dealer in 144 

Manufacturers of, tax on 163 

Transportation, refund of tax on mileage books 133 

Travelling bags, tax on excess price of i54 

Treasury Savings Certificates, limit on 218 

Trunks, tax on excess price of ; •• '54 

Trusts and estates, income taxable. (See also Fiduci- 
ary.) • 47- 50 

Exemptions for 57 

241 



INDEX 

TAGE 

Trusts and transfers in contemplation of death 130 

Understatements in returns 60 

Undistributed profits of corporations, when taxed to stock- 
holders 50 

United States defined 2 

United States Courts, jurisdiction of 193 

United States bonds, exemptions from income tax 29, 209 

Deposit as surety 210 

United States possessions, how citizens of, are taxed 102 

Income from sources within possessions of U. S. .< 103 

Validating clause 218 

Valises, tax on excess price of 154 

Virgin Islands 103, 104 

War-Profits and Excess-Profits Tax (on corporations only 

for 1921). Title III 104 

Admissible assets 109 

Provisions of income tax apply to 116 

Computation of tax 105, 106 

When 30% of income is from personal service cor- 
poration 107 

Exemption $3,000 to domestic corporation 108 

No $3,000 exemption to foreign corporation 108 

Credits for excess-profits tax 108 

For part of a year 108 

$3,000 exemption not allowed to foreign corpora- 
tions 108 

Definitions of words used in this title 104 

Exempt corporations 107, 108 

Gold mining, income from, exempt 108 

Government contract, income from 105 

Apportionment of 106 

Inadmissible assets 109 

Intangible property defined 109 

Invested Capital defined no 

Does not include in 

Of foreign corporation 112 

Unable to determine 112 

Limitation on amount of tax 106 

Mines, profits on sale of 116 

Net income 108 

Oil and gas wells, profits on sale of 116 

Personal service corporation income 107 

Provisions of income tax applicable 116 

Continued on next page 

242 



INDEX 

War-Profits and Excess-Profits Tax (on corporations only 

for 1921). Title III — Continued page 

Reorganizations 1 14 

Predecessor business, individual or partnership 60 

Basis of gain or loss on 8, 10 

Returns by every corporation not exempt 116 

Stock without par value 109 

Tangible property 109, no 

Taxable year 104 

Tax rates for year 1921 105 

War Risk Insurance exempt from income tax 30 

Wash sales, loss on not deductible 33, 66 

Watches, tax on sale of 155 

Wines, tax on 134- 136 

Withholding agent defined 3 

Withholding of tax, by whom and when 5I1 73 

On tax-free covenant bonds not additional income .... 66 

Works of art, tax on sale of I53 

Yachts, sale of, tax on 152 

User of, tax on 164 



243 



m 



w^ 



^'?<«.' 



'rfW 



n- 



"if^'ir^^ 



•S3
Internet Archive Audio

Featured

Top

Images

Featured

Top

Software

Featured

Top

Books

Featured

Top

Video

Featured

Top

Mobile Apps

Browser Extensions

Archive-It Subscription

Save Page Now

Full text of "Revenue act of 1921 : complete text of H.R. 8245 as finally adopted by the United States Senate and House of Representatives and approved by the President November 23, 1921, at 3.55 P.M. (Issued December, 1921)"

See other formats
